The Stock market crash of 1987 caused a rapid and severe downturn for practically all US stock prices. This crash also impacted all the other major world stock markets. It is speculated that the roots of the crash came from a series of monetary and foreign trade agreements. These trade deals deprecated the U.S dollar in order to adjust to trading deficits and then attempted to stabilize the dollar at its new lower value. This caused increased selling pressure in the worlds stock markets. On October 19, 1987, selling pressure had reached its peak, also known as Black Friday. The significant amount of selling resulted in steep declines, and total trading volume was so large that the computerized trading systems could not process all of them. Then on October 22, 1987, also known as Black Monday, the stock market has reached its largest percentage drop in one day history. This crash brought fear of extended economic instability all around the world. Also since there was a mass of trading volume in this period, the computerized trading systems could not process some orders leaving them unfilled, and these order imbalances prevented true price discovery. The Stock Market Crash of 1987 revealed the role of financial and technological innovation in increased market volatility.
Business & Economic Development 