Task 3: A Stock Market Crash
A stock market crash is a dramatic loss of shares of corporations. Crashes often follow speculative stock market bubbles such as the dot-com boom.
After the most famous crash in 1929, known as the Black Thursday when the Dow Jones Industrial Average dropped 50%, there came the Great Depression. The following years saw the Dow drop a total of over 85%.
There was also a crash on Monday, October 19, 1987, known in financial circles as the Black Monday, when the Dow lost 22%of its value in a single day, bringing to an end a five-year bull run. The pattern was repeated across the world.
The stock market downturn of 2002 was part of a larger bear market that took the NASDAQ 75%from its highs and broader indices down 30%.
Stock market crashes are driven by panic as much as by economics factors. They often follow stock market bubbles. So long as the prospect of further daily drops in the value stocks continues, those who invest in equities will be discouraged. If few people are willing to make further investments, a bear market is expected to persist. |