What is Black Monday?

Black Monday refers to the stock market crash on Monday, October 19, 1987. On that day, the global stock market plummeted after the New York Dow Jones Industrial Average took the lead in plunging, triggering a panic in the financial market and the economic recession that followed in the late 1980s.

Black monday

(Stock Market Incident)

Black Monday refers to Monday, October 19, 1987

October 16, 1987 (Friday)

Throughout October 1987:

· Hong Kong: Early in the morning on October 20,

Except for the market suspension in Hong Kong, other markets that were still open during the week have set trading restrictions.

Many people were surprised after the stock market crash. Because there was no news or news that was unfavorable to the stock market on that day, the decline did not seem to have a real reason. Many people at the time suspected herd psychology, efficient market hypothesis, or economic imbalance. The cause of the stock market disaster is still under debate.

In 1986, the US economy had changed from rapid development to slow development. The "soft landing" that directly caused the economic slowdown to explode. Slowly passed in 1987, it seems that the fear of a recession did not erupt immediately. The stock market peaked in August 1987. For the next few days, the market fell significantly. In August, observers warned that technical analysis showed that the market was in a cycle at this time, but that claim was not widely accepted.

Many people have put forward different theories after the stock disaster. The main reasons for the stock disaster include program trading, high stock prices, insufficient liquidity in the market, and herd mentality.

The most commonly accepted theory is that stock disasters are caused by program trading. Program trading uses computer programs to calculate stock price movements and trading strategies in real time. It gradually became popular on Wall Street in the late 1970s. Program trading enabled large-scale stock trading and futures trading to be bought and sold simultaneously. After the stock market disaster, many people said that the computer program saw the stock price fall, and then added the selling of stocks according to the mechanism set in the program, forming a vicious circle, which caused the stock price to fall faster, and the falling stock price caused the program to sell the stock more. Some people think that the stock market surge before the stock market crash was caused by program trading (the rising principle is the same, and the stock price is in the opposite direction), and the excessive stock price caused the stock market disaster.

Portfolio insurance is also one of the reasons. The so-called portfolio insurance means that when the market declines, you stop selling and sell the stock. The premise here is that there must be a potential takeover. But on that day, all bidders disappeared, and the way portfolio insurance operated pushed stock prices down quickly. Moreover, portfolio insurance relies on almost unlimited liquidity of funds, but liquidity does not always exist, and the liquidity of funds sometimes dries up. Such an investment strategy is not feasible when everyone wants to sell.

Economist Richard Roll believes that market globalization is the main cause, because program trading only prevails in the United States, but Hong Kong and Australian stock markets that do not have too many program transactions are leading the decline, so it is because market globalization has caused large fluctuations in a major stock market. Spread global stock markets in one day.

Some theories believe that the conflict between monetary policy and economic policy is the reason: At that time, the US authorities wanted the dollar to appreciate to suppress inflation, so the tightening of monetary policy came faster than the adjustment of European monetary policy. As a result, the market s confidence in the Hong Kong dollar pegged to the dollar declined. The Hong Kong stock market collapsed first, and then spread to other markets.

Jude Wanniski believes that the suspension of Louvre Accord by the seven major industrialized countries before the stock market crash will no longer guarantee the stability of the exchange rate of the US dollar against the Japanese yen and the West German mark, and it is also the reason for the market to lose confidence and withdraw from the stock market.

Another theory believes that the British 1987 disaster was one of the reasons for the stock market disaster: The 1987 typhoon occurred on October 16 (Friday before the stock market disaster), during which London, one of the world's financial centers, was severely affected. Many London's brokerage and financial industries People were unable to go to work that day, and there were no Internet transactions at that time. As a result, a large number of open trades could not be delivered before the weekend, which caused the open trades to go through the weekend, which disturbed market participants.