Monday, May 14, 2007

A look back to the 1987 Stock Market Crash

Almost 20 years ago the stock market lost over 20% in the course of a single day and about 30% over a two week period. Now the Fed's Mark Carlson looks back at the crash in a fascinating history piece.

A Brief History of the 1987 Stock Market Crash

A quick look in:
"The market crash of 1987 is a significant event not just because of the swiftness and severity of the market decline, but also because it showed the weaknesses of the trading systems themselves and how they could be strained and come close to breaking in extreme conditions. The problems in the trading systems interacted with the price declines to make the crisis worse. One notable problem was the difficulty gathering information in the rapidly changing and chaotic environment. The systems in place simply were not capable of processing so many transactions at once."
Not surprisingly given it is a Fed governor pays particular attention to the Fed's response which was (correctly) to add liquidity to the market.

A definite must read!

Thanks to for the link!

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