The first step in understanding the crash of 1987 is to understand what took place on what is now commonly referred to as “Black Monday.” Dallas billionaire Ross Perot described the day as, “God tapping us on the shoulder…a warning to get our act together before we get the big shock.”(Newsweek 1987) On October 19, 1987 the Dow Jones Industrial averaged experienced its largest single day drop in its history. In one day, the Dow dropped by 508 points to finish at 1738. This 22.6% drop decreased the value of all American stocks by appro

The obvious question looming over Wall Street in October of 1987 was, what went wrong, and why? “Some moneymen, like Nicholas F. Brady, the investment banker who will lead Reagan’s probe of the crash, had already concluded that the answer was simple: stocks were overvalued and ripe for a fall.”(Newsweek 1987) This was an interesting view because it exposes investor’s greed. In theory, these investors knew that the market was in for a big fall, but they just decided to keep investing and try to squeeze every last cent that they could out of the market. While there was overevaluation taking place, this could not be the only reason for a market to crash. Another possible reason would be Trade Budgets and Deficits. Some investors were led to believe that a large deficit during the 3rd quarter of 1987 would cause a decline in stock prices. Some felt the need to blame Alan Greenspan, who was the new chairman of the Federal Reserve Board. He was put in a tough position becau!

se he had to keep interest rates high enough to attract foreign money but low enough to encourage economic expansion. After years of research into the market crash, one specific reason has not been given to why the market failed, but these are a few that most analysts point to.

ximately $1 trillion. A 108-point drop foreshadowed this great drop on the previous Friday. Following Friday’s drop, stocks immediately began to fall Monday morning. The fall seemed to have cooled down by lunch time but by mid-afternoon a huge

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