A sudden and significant decline in the value of a market. A crash is most often associated with an inflated stock market. Causes for a crash may include an economic bubble in which securities, or other investments, are trading at prices far above their intrinsic value, or a highly-leveraged market in which debt is used to finance further investment. Crashes are distinguishable from a bear market by their rapid decline in a number of days, rather than a decline over a longer period of time. A crash can lead to a depression in the overall economy and subsequent bear market.


A crash is both an economic phenomenon and a psychological one. Investors who see a rapid decline in the value of a particular stock may sell off other securities as well, leading to the possibility of a vicious spiral marked by negative crowd behavior. In order to reduce the effect of a crash, many stock markets employ circuit breakers designed to halt trading if declines cross certain thresholds.

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  3. Hindenburg Omen

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  4. Panic Selling

    Wide-scale selling of an investment, causing a sharp decline ...
  5. Black Monday

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  6. Correction

    A reverse movement, usually negative, of at least 10% in a stock, ...
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  1. Is cyclical unemployment always due to recessions?

    Cyclical unemployment is always due to a downturn in the business cycle, but it may not be due to a recession. By definition, ... Read Full Answer >>
  2. What is Black Monday?

    Monday October 19,1987, is known as Black Monday. On that day, stockbrokers in New York, London, Hong Kong, Berlin, Tokyo ... Read Full Answer >>
  3. How do investors lose money when the stock market crashes?

    Over the last hundred years, there have been several large stock market crashes that have plagued the American financial ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

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