google
What is the Bite of 87?
The Bite of 87, also known as the 1987 Stock Market Crash, is one of the most significant events in the history of financial markets. It occurred on October 19, 1987, and resulted in a massive drop in stock prices across the globe. In this article, we will delve into the details of this event, its causes, its impact, and its legacy.
Background of the Stock Market in 1987
Before we dive into the specifics of the Bite of 87, it’s important to understand the state of the stock market leading up to this event. In the late 1980s, the stock market was experiencing a period of rapid growth. The Dow Jones Industrial Average (DJIA) had reached an all-time high of 2,722.42 on August 25, 1987.
This period of growth was fueled by a number of factors, including low interest rates, tax cuts, and the introduction of new financial instruments. However, this growth was not without its risks, as many investors became overly optimistic and speculative in their investments.
Causes of the Crash
There were several factors that contributed to the 1987 Stock Market Crash. One of the primary causes was the use of computerized trading systems, which allowed for rapid and automated trading decisions. These systems were not well-tested and could react to market movements in ways that were not anticipated.
Another factor was the psychological impact of the crash. As the market began to fall, investors became increasingly nervous and started selling off their stocks, which further exacerbated the decline. Additionally, the Federal Reserve’s decision to raise interest rates in the days leading up to the crash also played a role in the market’s decline.
The Day of the Crash
The day of the crash, October 19, 1987, began with a sharp drop in the DJIA. By the end of the trading day, the index had fallen by 508 points, or 22.6%, to close at 1,738.74. This was the largest one-day percentage decline in the history of the DJIA.
The crash was not limited to the United States; it affected stock markets around the world. In Europe, the FTSE 100 fell by 10.8%, and the German DAX fell by 12.2%. In Japan, the Nikkei 225 fell by 16.9%, marking the largest one-day percentage decline in its history.
Impact of the Crash
The 1987 Stock Market Crash had a significant impact on the global economy. It led to a loss of confidence in the financial markets, which resulted in a slowdown in economic growth. However, the crash also prompted governments and financial institutions to implement reforms to prevent future crashes.
One of the most notable reforms was the creation of the Global Financial System Committee (GFSI), which was tasked with improving the stability of the global financial system. Additionally, the crash led to the development of new risk management tools and practices.
Legacy of the Bite of 87
The 1987 Stock Market Crash has left a lasting legacy on the financial world. It has become a case study in the dangers of excessive optimism and the importance of risk management. The crash also highlighted the interconnectedness of global financial markets and the need for international cooperation to address financial crises.
Moreover, the crash has led to a greater awareness of the role of technology in financial markets. While computerized trading systems played a role in the crash, they have also become an essential part of modern financial markets. As such, the lessons learned from the Bite of 87 continue to shape the way we approach financial markets today.
| Market | Percentage Decline | Date |
|---|---|---|
| Dow Jones Industrial Average | 22.6% | October 19, 1987 |
| FTSE 100 | 10.8% | October 19, 1987 |
| DAX | 12.2% | October 19
Related PostsLike |
