To significant degrees, the market is being manipulated indirectly by the dovish and wishful-thinking policies of the Fed and directly by the high frequency traders. Although there were worrisome declines in March across the board and in certain stocks during the summer, there was no stock market crash until the fall. Farmers were hit by the depression as there was a famine during that time and they did not have any food or money.

Our most robust finding is that cross-sectional heterogeneity in expected returns, an indicator of the amount of disagreement, increased substantially with the stock market crash. The fraction of fifty-fifty probability answers in the past is a strong predictor of uncertainty about stock market returns. We decided to use the 2008 measures for the analysis despite its potential endogeneity. By Friday, the situation was so out of control that the decision was made to close down the stock market. The SCI (Short Crossover Indicator) and the NTTI (Near-Term Trend Indicator) are the indicators I had been using to forecast the near-term trend for the market. Of course, the bears have suggested for years that this market is due for a serious decline.

On October 19, 1987, the financial world was shaken by a dramatic stock market collapse when the Dow Jones Index fell 508 points, the largest single day drop in U.S. history. Margin buying was another important factor in the rise in stock market investment.stock market crash

Stockholders and those who follow the stock market are significantly more optimistic, and the latter are also less uncertain. This is noted by a declining pattern of lower highs in the RSI as stocks continue to make higher highs, a sign that the market is topping out”.

There is no numerically specific definition of a stock market crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days. March 2008 saw the failed bailout of Bear Sterns and its subsequent sale to JP Morgan, but the rest of the Spring and the Summer went relatively quietly. Figure 1 shows time series of four stock market variables over the course of the HRS sampling period. A reform of the financial system was essential to prevent a crash of such magnitude. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday.

By Kay