The Stock Market Crash Of 1929 And The Great Depression (3)
Technical analysis of the Dow Jones Industrial Average show that a catastrophic market crash is looming. Demand for goods declined because people felt poor because of their losses in the stock market. Bear markets are a period where declining stock prices occur over a period of time, sometimes months or years. The New York Stock Exchange also make sure that this would never happen again by implementing the uptick rule. The average NYSE trading volume in period from the middle of September 2007 until now is about 7 billion shares per day. They have happened in every part of the world where there was an industrialized market economy.
However, not all was lost: a rally that started when Richard Whitey, then head of the New York Stock Exchange, calmly began buying shares of U.S. Steel and other companies. To sum up, if you want to be profitable in the market, you must adapt fast to changes because the market is so dynamic. To put it simply, the Stock Market is really people, humans who are either a buyer or seller and controlled by emotions. The conventional assumption that stock markets behave according to a random Gaussian or normal distribution is incorrect.
This was the worst stock market crash that affected global economics because this crash lasted longer than the short plummeting that had occurred in 1987. What made Black Thursday such a bad day in the history of the New York Stock Exchange was the loss of people’s faith in Wall Street For more, see Timeline of the Great Depression. Regardless, investors no longer regarded high corporate profits and dividends, high wages, readily available bank debt , a booming auto industry and a relative lack of stock market regulation solely as signs of better days ahead. The 1920s saw the stock market prices soar in blooming health with the industrial and technological growth of the decade. By the summer of 1929, it was clear that the economy was contracting and the stock market went through a series of unsettling price declines.
In 1963, Benoît Mandelbrot proposed that instead of following a strict random walk, stock price variations executed a Lévy flight.25 A Lévy flight is a random walk which is occasionally disrupted by large movements. The market continued to decline in value, leaving investors who had purchased stock on credit financially destroyed. This did little more than temporarily stem the tide, however, because from Black Thursday to October 29, 1929 ( Black Tuesday ), stocks still lost more than $26 billion of value and more than 30 million shares traded. When word spread that banks’ assets contained huge uncollectable loans and almost worthless stock certificates, depositors rushed to withdraw their savings.
Unfortunately for the economy, so many Americans invested money in the stock market that stocks became inflated in price. Now that we are nearing the end of the year, prognosticators will be all over the airwaves talking about their stock market prediction. As a rule, after a huge amount of money is taken out of the market (when SBV declines) we see a rebound (investors start to invest again).