The Crash in Perspective
2 Pages Posted: 19 May 2006
Date Written: March 1988
The October 1987 crash of stock prices is a largely unexplainable event, much like any other setting of prices in the stock market, only larger. If anything the market operated efficiently in moving prices to a new level that tended to persist for many months thereafter, thus indicating that the crash was not an overreaction. Statements by the SEC chairman concerning a possible trading halt and the halt in index arbitrage trading probably added to the volatility. Attempts to limit volatility by regulation are misguided and will prove damaging.
Keywords: crash of 1987, volatility, market efficiency
JEL Classification: G14
Suggested Citation: Suggested Citation