Black Monday refers to 19th October 1987, when share prices in New York, London and around the world fell by up to 25% in one day. The bear market lasted for a week and many feared this heralded a coming recession. But, the depression never materialised and stock markets recovered.
Causes of Black Monday 1987
It is hard to pinpoint the exact causes of black Monday as it appears to be mainly non economic factors such as:
- Market sentiment and herding behaviour
- Use of complex derivatives
- Program trading – automatic trading by computers which react to certain data.
- Effect of falling share prices on the economy
- The relationship between the stock market and the economy