BLACK MONDAY

Black Monday is a disaster in the Stock market which marked the beginning of a huge decline and altered the lives of several people.

Black Monday occurred on October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost 22.6% in a single day. The event marked the beginning of a global stock market decline, and Black Monday became one of the most notorious days in financial history. The S&P 500 lost even more than the Dow Jones with a 30% loss on the day. Worldwide losses attributed to Black Monday were estimated at US $1.71 trillion. Many people feared that this might mark the beginning of another Great Depression.

There are multiple reasons for what might have caused this, but the exact reasons can never be known. Possible explanations for the initial fall in stock prices include a nervous fear that stocks were significantly overvalued and were certain to undergo a correction, persistent US trade and budget deficits, and rising interest rates. Another explanation for Black Monday comes from the decline of the dollar, followed by a lack of faith in governmental attempts to stop that decline.

There was little to no role of any outrageous news that caused this since there was no big news the week preceding the crash. The stock market crash of 1987 revealed the role of financial and technological innovation in increased market volatility. In automatic trading, also called program trading, human decisionmaking is taken out of the equation, and buy or sell orders are generated automatically based on the price levels of benchmark indexes or specific stocks. Leading up to the crash, the models in use tended to produce strong positive feedback, generating more buy orders when prices were rising and more sell orders when prices began to fall.