The Stock Market Crash! Please Help…?
Published on Monday, February 8, 2010 
I have one question that I just can’t seem to wrap my head around. I’ve asked my brother but he doesn’t seem to be able to answer it.
Anyways the question is:
Would the effects of Black Tuesday have been different if the Governing Committee had decided to close the New York Stock Exchange? Explain.
If you could answer or just help give me a little more insight that would help answer the question, that would be great.
Please and thank you.
3 Comments
Comment by PennyLee
The Black Tuesday crash was so deep and fast because people were acting out of panic. The further the market went down, the faster the trading became, forcing the market down even further. No one was buying. Massive amount of wealth was lost. If trading had been halted, then the panic wouldn’t have built to the level it did. Trading would have been more orderly. At least that’s the theory.
Comment by Net Advisor™
A large amount of stock had been purchased on margin, and as the market started its dive, those who were on margin just had to sell immediately. Had they been prevented from doing so, would they have a claim against the market?
Well, let us assume they were going to have trading halted if the market started a major slide. Now the margin holders know full wel that they, as individuals, must beat the bell, they have to get their junk sold before the market closes.
When the markets open again, the same group of margin holders are joined by almost everyone, in a mad dash to get out, and of course only a few can before the market again slams the doors shut. We could mitigate this surge for the exit by limiting the number or the dollar value of securities that can be offered for sale each hour. But would that have driven investors to buy? Would you go out to the market to buy knowing that it is in controlled freefall?
So, if nobody is out buying, what sets the price? Lurkers who put in bids that are ridiculously low. I mean prices that are half what yesterday’s market sold for.
Those ridiculously low prices would attract bargain hunters, and so we might carry along with our market at half yesterday’s prices. That is actually good,is it not?
Comment by donfletc
Ultimately the outcome would of been the same.