In financial markets, Black Monday is the name given to Monday, October 19, 1987, when the Dow Jones Industrial Average (DJIA) dropped by 508 points to 1739 (22.6%), and on which similar enormous drops occurred around the world. By the end of October, stock markets in Hong Kong had fallen 45.8%, Australia 41.8%, Spain 31%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%. New Zealand's market was hit especially hard, falling about 60% from its 1987 peak, and taking several years to recover. blank">Share Price Index, 1987-1998, Commercial Framework: Stock exchange, New Zealand Official Yearbook 2000. _Statistics New Zealand, Wellington. Accessed 2007-12-12. (The terms Black Monday and Black Tuesday are also applied to October 28 and 29, 1929, which occurred after Black Thursday on October 24, which started the Stock Market Crash of 1929. Confusingly, in Australia the 1987 crash is also refered to as Black Tuesday because of the timezone difference)
The Black Monday decline was the largest one-day percentage decline in stock market history. Other large declines have occurred after periods of market closure, such as Saturday, December 12, 1914, when the DJIA fell 24.39%, ending the four month closure due to the outbreak of the First World War, and Monday, September 17, 2001, the first day that the market was open following the September 11, 2001 attacks.
Interestingly, the DJIA was positive for the 1987 calendar year. It opened on January 2, 1987, at 1,897 points and would close on December 31st, 1987, at 1,939 points. The DJIA would not regain its August 25, 1987 closing high of 2,722 points until almost two years later.
A degree of mystery is associated with the 1987 crash, and it has been labeled as a black swan event. Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached.
In the wake of the crash, markets around the world were put on restricted trading primarily because sorting out the orders that had come in was beyond the computer technology of the time. This also gave the Federal Reserve and other central banks time to pump liquidity into the system to prevent a further downdraft. While pessimism reigned, the market bottomed on October 20.
