> What causes a crash in the stock market?

What causes a crash in the stock market?

Posted at: 2014-12-05 
It depends on which market crash you are referring to. Each one is unique and has many factors. Generally, markets crash when they encounter systematic risk events. These are events that effect the whole "system." Asset classes become highly correlated and tend to decline together. Great Depression, 1987, 2001, 2008 are all examples of this. 2001 was a tech bubble. 2008 was a housing and financial crisis. 1987 was largely caused by portfolio insurance and a computerized hedging strategy that kept selling upon itself very quickly. To summarize, there are a number of events that can cause a market to crash. They don't happen often, but are no good when they do. Typically a two standard deviation from the mean is considered a "crash," or "black swan event." Hope this helps

Generally, a crash in the market is caused by emotions. Logic indicates that stocks should return about 8% per year. Emotion or the belief of greater returns in the future will increase the price of stocks or the entire market above that. Emotion will also cause the prices to go lower than that.

There is only one objective of all stocks, and that is an expectation of a return on the money invested.

"Steve" may have been on the planet 78 years, but apparently spent none of that time learning anything about how the Stock market works! There are ALWAYS exactly the same number of shares being bought as there are being sold....without a "buyer" AND a "seller", this IS no trade....there are "Market makers" (agencies that buy shares up and hold them briefly when more are offered for sale than there is a demand for), but other than that, the ratio of "shares sold" to "shares purchased" is always one!

What causes a 'crash' is when people who own a stock want to "get rid of it" and so are willing to offer to sell it for less and less the longer it remains without any bidders...

The major markets are no longer susceptible to real "crashes" because there are now laws in place that automatically trigger market shutdowns (to allow investors to "cool off") if there is a significant fall...

Well

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Most, if not all, have been caused by over-leverage. The classic case is the Great Depression.

(a lot) more sellers than buyers.

when everyone wants to sell and no one wants to buy.