stock market crash

Definitions (2)

1. Precipitous and rapid decline (that may persist for months or years) in the prices of shares traded on a stock exchange, caused by panic selling. Stock market crashes are triggered typically by loss of investor confidence after an unexpected event, and are exacerbated by fear. They are usually preceded by a period of prolonged and high inflation, economic and/or political uncertainty, or hysteric speculative activity. They bring normal economic activity to a halt, wipe out the savings of millions of investors, and bring widespread misery in their wake, specially for the weaker and vulnerable sections of the society. Crash of the US stock-market on New York stock exchange (NYSE) on October 29, 1929 destroyed 14 billion dollars in shareholder value, and the crash on Oct 19, 1987 on the same exchange wiped out some 500 billion dollars of shareholder value. See also Black Mondays.

2. A situation in which a stock market experiences a sudden and major decline in the prices of its underlying stocks. A stock market crash could be brought about by the collapse of a speculative bubble, a financial crisis or an economic crisis. The severity of a stock market crash depends on both the underlying financial events that precipitated the problem and the pressure placed on the stock market by investors reacting to negative news. See also recession, depression.