Economics Atlas

How Wealth Is Ordered
Events

Black Monday (1987)

Also Known As Black Monday

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On October 19, 1987, the Dow Jones Industrial Average fell 508 points, 22.6 percent, in a single session, the largest one-day percentage decline in the index's history. The crash began in Asian markets outside Japan and moved westward through Europe before hitting the United States and finally Japan, a genuinely global event with worldwide losses estimated at 1.71 trillion US dollars. The cause remains debated: contemporary analysts blamed computerized program trading and portfolio insurance, a hedging strategy that sold stock automatically as prices fell, for amplifying the decline, while economist Hayne Leland and a later Chicago Mercantile Exchange study argued ordinary investors, mutual funds and broker-dealers drove several times more of the selling than portfolio insurers did. Newly installed Federal Reserve chair Alan Greenspan, weeks into his term, responded the next morning with a public statement affirming the Fed's readiness to supply liquidity to the financial system, widely credited with containing the crash's spread into the broader economy.

The relative weight of portfolio insurance versus ordinary investor selling in driving the crash is genuinely disputed; see the dissent from Hayne Leland and the Chicago Mercantile Exchange research below.
Facts
Event Year
1987 1
Event Date
1987-10-19 1
Location
Global (Asian markets outside Japan, then Europe, then the United States and Japan) 1
Cross-Tradition Connections

Associated With

Alan Greenspan, Economists

Greenspan, weeks into his chairmanship, responded the next morning with a statement affirming the Fed's readiness to supply liquidity, widely credited with containing the crash's spread into the wider economy.

Source Wikipedia

Trading on the New York Stock Exchange itself was disrupted, not only the Dow Jones Industrial Average that tracks it.

Source Wikipedia
In the Other Atlases
Sources
1. Wikipedia
Wikimedia FoundationBlack Monday (1987), The crash
Quote, Black Monday (1987), The crash
On that Monday, the DJIA fell 508 points (22.6 percent)
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1. Wikipedia
Wikimedia FoundationBlack Monday (1987), outcome summary
Quote, Black Monday (1987), outcome summary
Stock markets crashed worldwide, first in Asian markets other than Japan, then Europe, then the US, and finally Japan
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1. Wikipedia
Wikimedia FoundationLead section
Quote, Lead section
Black Monday (also known as Black Tuesday in some parts of the world due to time zone differences) was a global, severe and largely unexpected stock market crash on Monday, October 19, 1987.
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1. Wikipedia
Wikimedia FoundationAssociated With: Alan Greenspan, Alan Greenspan, Chairman of the Federal Reserve
Quote, Associated With: Alan Greenspan, Alan Greenspan, Chairman of the Federal Reserve
The Fed affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.
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1. Wikipedia
Wikimedia FoundationIn Category: Events, Black Monday (1987), lead section
Quote, In Category: Events, Black Monday (1987), lead section
On that Monday, the DJIA fell 508 points (22.6 percent)
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1. Wikipedia
Wikimedia FoundationAssociated With: New York Stock Exchange, Black Monday (1987), The crash section
Quote, Associated With: New York Stock Exchange, Black Monday (1987), The crash section
Of the 2,257 NYSE-listed stocks, there were 195 trading delays and halts that day.
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Dissenting Readings (1 dissenting reading)
Description

Financial economist Hayne Leland, one of portfolio insurance's own co-inventors, argued the impact of portfolio hedging on stock prices during the October 1987 crash was probably relatively small, contradicting the widely repeated narrative that blames automated portfolio-insurance selling as the crash's primary amplifier. A later Chicago Mercantile Exchange study supported this position, finding the selling pressure from other investors, mutual funds, broker-dealers and individual shareholders, was three to five times greater than that from portfolio insurers, making ordinary investor panic rather than computerized hedging the larger driver of the decline.

A dissenting reading, from Hayne LelandWikipedia, Wikimedia Foundation

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