The Impact Of The Stock Market’s Crash On Rural America
Stock market crashes are social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell. Xavier Gabaix, a finance professor at New York University, has derived a crash-frequency formula that he believes captures a universal trait of all markets, not just equity markets or those in the U.S. According to that formula, the odds of a 12.8{bf6128eaee7daf804a40e739f155a69f2d5a72ca2bacccc9954495bcd60bdcac} crash in any given six-month period are 0.92{bf6128eaee7daf804a40e739f155a69f2d5a72ca2bacccc9954495bcd60bdcac}, almost as low as the actual frequency in the U.S. stock market over the last century.
These…