25th Anniversary Black Monday 1987 Crash

Source: WSJ


Source: NYT


25 years ago today, the US stock market had an unprecedented one day crash, falling ~23% on Black Monday — the largest one day decline in any market in history.

All investors should be at least one part market historian — toward that end, here is a round of the television, media, books, academic papers and reviews of what happened on October 19, 1987.

• Video from television:
…..-Evening News the day of the crash, October 19th, 1987
…..-Louis Rukeyeser, Wall Street Week, Friday October 23, 1987

• Books: Tim Metz wrote the definitive book on the 87 crash:
…..-Black Monday: The Catastrophe of October 19, 1987 . . . and Beyond
I found it tremendously helpful when I was doing my research for Bailout Nation.

• Academic Papers:
…..-Robert Shiller, Investor Behavior in the October 1987 Stock market Crash: Survey Evidence, NBER (PDF).
…..-Mark Carlson, A Brief History of the 1987 Stock Market Crash with a Discussion of the Federal Reserve Response, Federal Reserve Board, Divisions of Research & Statistics and Monetary Affairs (PDF).
…..-Kenneth R. French, Crash-Testing the Efficient Market Hypothesis,
University of Chicago

• Remembrances:
…..-Art Cashin’s 25th Anniversary of Black Monday discussion
…..-Crash of ’87 Recollections: ‘My Singularly Worst-Day Ever’, Paul Vigna, MarketBeat
…..-Rob Fraim: One traders 1987 experiences
…..-2011 Crash Remembrance


More charts and headlines after the jump


• End of day screen shot, October 19, 1987

Courtesy of Helene Meisler,  @hmeisler


• Study: Intra-day S&P fall on October 19th:

Source: Federal Reserve Board


• NYT front page headline:


As stock prices soared this year, a chorus of pessimists warned that 1987 was looking more like 1929, when a stock market crash helped to usher in the Great Depression. Yesterday, after a plunge reminiscent of the worst days of 1929, one pressing question was whether the aftershocks would be as devastating to individuals and the nation.

The quick answer, many economists say, is no. The huge losses on Wall Street constitute a substantial blow to the economy at large. But there are many safeguards in place today -some instituted directly in response to the Depression – that would tend to prevent the cascading financial collapse that characterized the crash, impoverishing millions of Americans.

“A stock market crash doesn’t ripple out into the economy with the same force” as it did in 1929, said Geoffrey H. Moore, director of the Center for International Business Cycle Research at Columbia.



• Intra-day Dow fall on October 19th:

Source: Wikimedia

This post was originally published at The Big Picture and is reproduced here with permission.

2 Responses to "25th Anniversary Black Monday 1987 Crash"

  1. Matt Dubuque   October 21, 2012 at 9:03 pm

    I was completely short this market, starting in late August 1987; it was obvious this would happen because of the bloodbath that was occurring in Japanese bonds beforehand.

    I remember the idiot oligarchs and cretins at the investment banks calling basket trading (capitalizing on the spread between the futures and underlying cash stocks) "RISK-FREE arbitrage at the time.

    Of course, during this crash, ALL the floor traders in Chicago split the scene and went hoe because they were not about to risk their little life savings stakes of half a million just to "provide liquidity" by catching a falling knife and buying these futures as the "risk free arbitrage" positions were unwound by panicked quants.

    Funny how I never heard that term "risk free arbitrage" after that crash of 1987.