Explain how stock market “crashes”?

Sao Sengsily: Explain how stock market “crashes”?

Answers and Views:

Answer by Shelley
A stock market crashes, or loses much of its paper value, when too many people holding too big a percentage of its paper value lose confidence in the stock market. At that point, stock owners look for buyers for their stocks and bondholders look for buyers of their bonds – at whatever price they can get. A downward spiral ensues.

The 1929 crash, which actually occured over several months, although it was precipitated by a single day of selling off, lost 25-50 percent of its value. The stock market did not recover from those few months of sell offs until the 1970s. The crash in 1987 was actually larger in terms than the 1929 crash (in raw numbers) but as a percentage of the overall stock, it was a small percentage.

Answer by paul l
When something happens like Ford starts to sell fewer cars each year, people sell the stock. In a hurry to get out and save capital some investors sell quickly, the prices drop and soon more people want out right away so they sell too and soon it has dropped 45 cents. On 1000 shares that would be 450 dollars. Now add to all this something like another 911 when shares of all companies pretty well dropped 30 ot 40 percent in one week, then you would have a market crash. Add something else like an insect eating the corn crop and it may be a 50 to 60 percent drop. When everyone wants out at once the stocks go down pretty quick.

Answer by NW_iq_140
The crash in simple terms was when the stocks lost most of their value.

In the stock market- it is a true open market- someone wishes to buy, another wants to sell. They agree upon a price. the transaction is performed and everyone is happy.

Whne a market dives, crashes, or corrects itself it is a matter of sellers trying to unload their stocks – with out any buyers buying. As sellers become desperate- (ubnable to sell their stocks) they drop the price, if no one buys then sellers continue to drop the price. A better way to look at it is the buyers offer lower prices, – when they get a overload of offers to sell they see an opportunity- and offer less until the prices stabilize.

The crash occurred when sellers would sell at lower and lower prices – this caused a panic becasue other stock owners di dnot want to own “worthless” stock and proceeded to flood the market with shares.