Black Monday - Business in United States of America
The Event: Severe U.S. stock market crash that was preceded and followed by stock market crashes in other countries
Date: October 19, 1987
Place: New York, New York
Significance: The Black Monday crash, one of the worst in U.S. history, had an enormous impact on American and world business. Following numerous studies of the crash, reforms were implemented to forestall such an event happening again.
On October 19, 1987, Black Monday, Wall Street witnessed the loss of nearly $1 trillion in stock values. The Dow Jones Industrial Average fell 508 points— 22.6 percent of its total value—to $1,738.74. The Standard and Poor’s 500 index fell 20 percent to $224.84, and the NASDAQ composite index ended at $360.21. A significant number of stocks on the New York Stock Exchange (NYSE) experienced losses that day. The NYSE rebounded quickly, however, and the U.S. economy did not experience a subsequent depression. Unlike the aftermath of the stock market crash of 1929, the American economy revived, and the stock markets attempted to learn from the Black Monday phenomenon.
The rest of the world was not as fortunate as the United States. By the end of October, Hong Kong, Australia, Spain, the United Kingdom, Canada, and New Zealand all experienced significant losses on their stock exchanges, and their economies underwent serious economic dislocations.
- Arbel, A., and Albert Kaff. Crash: Ten Days in October . . . Will It Happen Again? Chicago: Longman Financial Services, 1989. Analysis of the factors contributing to Black Monday and the likelihood of similar factors causing a similar event in the future.
- Bernstein, Peter. Capital Ideas: The Improbable Origins of Modern Wall Street. New York: Free Press, 1992. Historical study of the evolution of the U.S. stock markets, from their beginnings through the late twentieth century.
- Kamphuis, Robert W., et al., eds. Black Monday and the Future of Financial Markets. Chicago: Mid- America Institute for Public Policy Research, 1989. Public policy-focused study of the lessons to be learned from Black Monday.
- Lindsey, Richard, and Anthony Pecora. “Ten Years After: Regulatory Developments in the Securities Market Since the 1987 Market Break.” Journal of Financial Services Research 13, no. 3 (1998): 283-314. Overview of the reforms instituted during the decade following the 1987 stock market crash.
- Malliaris, A. G., and Jorge Urrutia. “The International Crash of October, 1987: Causality Tests.” Journal of Financial and Quantitative Analysis 27, no. 3 (1992): 353-364. Another causal analysis of the crash, but focused globally rather than just on the American experience.
- Schwert, G. William. “Stock Volatility and the Crash of ’87.” Review of Financial Studies 3, no. 1 (1990): 77-102. Looks at the role of volatility as a causal trigger in the stock market crash of 1987.
See also: Derivatives and hedge fund industry; Financial crisis of 2008; Great Depression.