Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence

43 Pages Posted: 7 Mar 2001 Last revised: 9 Sep 2010

See all articles by Robert J. Shiller

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

Date Written: November 1987

Abstract

Questionnaires were sent out at the time of the October 19, 1987 stock market crash to both individual and institutional investors inquiring about their behavior during the crash. Nearly 1000 responses were received. The survey results show that: 1. no news story or rumor appearing on the 19th or over the preceding weekend was responsible for investor behavior, 2. investors' importance rating of news appearing over the preceding week showed only a slight relation to decisions to buy or sell, 3. there was a great deal of investor talk and anxiety around October 19, much more than suggested by the volume of trade, 4. Many investors thought that they could predict the market, 5. Both buyers and sellers generally thought before the crash that the market was overvalued, 6. Most investors interpreted the crash as due to the psychology of other investors, 7. Many investors were influenced by technical analysis considerations, 8. Portfolio insurance is only a small part of predetermined stop-loss behavior, and 9. Some investors changed their investment strategy before the crash.

Suggested Citation

Shiller, Robert J., Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence (November 1987). NBER Working Paper No. w2446. Available at SSRN: https://ssrn.com/abstract=227115

Robert J. Shiller (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://www.econ.yale.edu/~shiller/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
203-432-3708 (Phone)

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
271
rank
104,992
Abstract Views
4,105
PlumX