» Articles on the History of Mutual Funds » Stock Market Crashes History

Stock Market Crashes History

The history of the stock market is full of examples of market crashes that had substantial negative consequences on the assets of many investors. During October 1929, the market experienced one of these crashes with the Dow Jones Industrial Average declining by 12.8%. The next day it decreased with additional 11.7%.

This was not the first occurrence of a market crash. In 19th of October 1987 the US stock market lost approximately a quarter of its value. This decline was experienced for as few as several hours.

The bear markets are other events that cause significant losses with regards the values of the traded shares. The losses lasted months or even years.

Types of Market Crashes

Not all market crashes come to such destructive extents as the ones previously mentioned.

  • Corrections

    The first type of crash is when a short-lived decline in the market occurs. Nevertheless, many investors panic due to the unbeneficial conditions currently taking place.

  • Prolonged depression

    Under the conditions of prolonged depressions the price of the shares experience incremental falls. No drastic declines of prices are observed, and the decrease is extended to longer periods of time.

The experienced boom of the 1980s began to decline in 1987 when the corrections type of market crash occurred. Until then, the prices of the shares were ever increasing. After a certain point they reached a plateau. In the autumn of 1987, the market began to decline.

One of the market crashes that didn't manage to gain justification was the Black Monday crash. It represents the biggest stock market crash, which was experienced during one day. Additionally, the Dow made its record by experiencing a 100-pont increase for just one day. The losses that were incurred took a year to cover.

Boom and Decline

One of the worst days for the stock market was the so called Black Monday. The history knows many other examples, but this one is most remembered due to its highly negative consequences

A more recent stock market crash is the one that occurred on the 27th of October 1997. Great confusion was caused by the appearance of such emerging markets as the debt-laden Asian. As a result the Dow decreased by 550 points. Thanks to the 1987 circuit-breaker system, the Dow was saved from further declines.

The stock market didn't manage to completely stabilize. This was caused by such factors as the collapse of the economy of Russia and the failure of LTCM hedge fund, which was marked by billions of dollars in losses.

The 1990s boom in hi-tech represented one of the most astonishing bursts in the history, due to its irrational exuberance. 

The Wall Street Crash

The Wall Street Crash took place in 1929 and represents an example of the prolonged type of market crashes. This crash was characterized by a period of rapid increase followed by a period of drastic decrease.

What made the Wall Street Crash worse was its long period of lasting which extended to the beginning of the World War II, and the military production that occurred back then.

Before the crash the Dow was at above 300 points ending up at the position of 44 points after the Wall Street crash took place. It took more than 20 years to recover to its initial levels.

Market Crash vs. Bear Market

A clear distinction between a bear market and a simple market crash should be made. The first is characterized by continuous decline in prices over a long period of time.

According to the Dow, there were approximately 30 bear markets during the 20th century, whereas in London they were around 25.

Bear markets are notorious for their concealed occurrence. Due to their prolonged and incremental activity investors may not notice the decline in the prices.

Other examples of bear markets are the 1972-1974 Opec decision driven hike of oil prices and the Japanese decline in share prices which was not until the end of 1980s to achieve its recovery. The Tokyo Nikkei share index experienced an increase in its points to reach 40,000 in 1989. However, it dropped to the amazing 10,000 points in the beginning of this century. Since experiencing this drop it has not still managed to recover to its precious position.

This millennium is not deprived of its bear market. The biggest one that has occurred is the one in the hi-tech field, which however experienced a faster rate of development. The tech shares specialized NASDAQ market experienced a peak of 5,000 point in 2000. Currently, it is at the 1,000 position.

The Moral

Due to the volatility and uniqueness of every stock market crash, it will be a mistake to draw any whatsoever theory on the reasons for the occurrence of these crashes.

However, the statistics show that 21 of the 25 bear markets have succeeded to recover after experiencing 35% of a loss. This information applies for the bear markets of Britain.

The good news for bears is that the possibility of experiencing another bear market is high. This is so since a trend of occurrence during halving intervals is observed (89 years, 38 years, 18 years, and 10 years).

Despite the many losses that investors incur due to bear markets, shares remain one of the most profitable long-term investments. For instance, if you have invested as little as one dollar in General Electric in the beginning of the 1980s, your small investment will turn to $1,200 in this century.


Having in mind all these examples of crashes and the consequent losses, the 2002 market crash is not of the same magnitude as the others from the history.

For instance the Dow has decreased by 17% since its last high position. Additionally, it is only 26% less form its record.

As with the FTSE 100, in July 2002 it has decreased by 24% since its peak experienced in mid-May. It has decreased by 43% from its highest peak of 6,930 points that was experienced in 1999.

It is up to you to decide on the seriousness of the 2002 market crash. Since it is unique in itself, no historical parallels can be done.

Rate this article : Low
  • Currently 2.9/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5