The stock market crash of is the most famous stock market crash of all time.

Unit 5: The Stock Market Crash and Great Depression Flashcards | Quizlet

The years preceding the stock market crash of were filled with irrational exuberance. Stock prices had risen across the board, even for companies that posted little profit , and investors were very optimistic that the general upward trend of the market and the economy would continue for some time. The Dow Jones Industrial Average nearly doubled, rising from in early to by September 3, Prices began falling slightly but steadily, however, as investors began to take profits.

Many economists were not sure what to make of the slide, and Irving Fisher, a well-known economist at the time, dismissed it as nothing serious.

Then on October 10, , the Dow Jones Industrial Average closed above for the first time in 10 trading days. This respite sparked profit taking , and the Dow Jones Industrial Average began falling again amid the selling.

The selling became intense on Monday, October 23, and the market fell 6. By October 24, Black Thursday , the selling frenzy reached a critical mass and turned to flat-out panic. The trading volume got so high that it delayed the ticker tape by over an hour, which created confusion and anxiety. Some exchanges were so overwhelmed that they closed early. The Dow Jones Industrial Average closed at The stock market crash of is often associated with stories of investors and traders jumping out of windows after losing everything.

However, not all was lost: Steel and other companies.

His confidence encouraged others to begin buying. The days surrounding the stock market crash of were especially painful for investors who had borrowed money to purchase stocks that had become worthless or close to it. The situation influenced what became a major turning point for the American economy because many of these borrowers, who had leveraged themselves considerably in an effort to participate in the bull market , were ruined financially.

Is The Stock Market Going to Crash? - Define Financial

They had to sell everything to pay back their debts , and many couldn't pay them back at all. Thousands of banks failed as a result; businesses closed, unable to get credit ; and the nation's disposable income fell precipitously.

Historians often cite the stock market crash of as the beginning of the Great Depression because it marked not only the end of one of the nation's greatest bull markets but also the end of widespread optimism and confidence in the U.

As with many market reversals, the causes are numerous, intertwined, and controversial. For example, many cite the September passage of the Smoot-Hawley Tariff Act, which placed high taxes on many imported items, as a major contributor to the market ' s instability. Others note the huge amount of leverage investors had used to buy stocks , and some cite the scandal-ridden recall of British funds invested in the United States and the September 26 spike in the Bank of England's discount rate.

Stock market crash - Wikipedia

Regardless, investors no longer regarded high corporate profits and dividends, high wages, readily available bank debt , a booming auto industry and a relative lack of stock market regulation solely as signs of better days ahead. They began to see them as signs of market ready for reversal.

Besides the dramatic effect on investor psychology, the stock market crash of contributed to the creation of a variety of new laws, organizations and programs designed to improve the country's infrastructure, further social welfare and prevent corporate fraud and abuses. These included the establishment of the Federal Depository Insurance Corporation and the passage of the Securities Act of , the Glass-Steagall Act of , the Securities Exchange Act of and the Public Utility Holding Act of The panic caused by information delays also spawned faster ticker systems that could handle heavy trading days.

Our in-depth tools give millions of people across the globe highly detailed and thoroughly explained answers to their most important financial questions.

Each month, more than 1 million visitors in countries across the globe turn to InvestingAnswers. Financial Dictionary Calculators Articles. Stock Market Crash of How it works Example: Most Popular Calculators Amortization Schedule Calculator: What Is the Repayment Schedule for My Mortgage?

Compound Annual Growth Rate CAGR Calculator. How Much Could I Save Up Over Time?

Million Dollar Savings Calculator: How Long Do I Need to Save to Become a Millionaire? How Much Do I Need To Save to Become a Millionaire? CONTENT LIBRARY Financial Terms Calculators Education Investment Ideas Personal Finance About Us Advertise Contact Us. Terms of Use Privacy Policy Disclaimer.