Debunking the 'October Effect' myth about stock market crashes

  • Nation
  • Thursday, 28 Sep 2017

Although historically, many bad things have happened in stock markets around the world in the month of October, the dreaded 'October Effect' is more perception than phenomenon, experts say.

> October has a reputation of being one of the scariest months for investors. Some of the biggest stock market crashes in history happened in this month.

Experts argue that the so-called “October Effect” has more to do with psychological expectations than an actual phenomenon.

> The Panic of 1907 was a US financial crisis that began in mid-October when the New York Stock Exchange slumped 50% from its peak just a year earlier. One of the largest trust companies in the country was suspended, triggering nationwide fears and massive cash withdrawals from New York City banks.

> The Great Crash, or the Stock Market Crash of 1929, began on Oct 24 (Black Thursday) – the first day of panic selling that devastated the market. It signalled the beginning of the 12-year Great Depression.

> Black Monday refers to Oct 19, 1987, when stock markets around the world plunged in a sudden financial meltdown.

It started in Hong Kong before spreading westward, hitting bourses like dominoes.

The US Dow Jones Industrial Average suffered its biggest percentage loss (22%) in history that day.

> The Asian economic crisis erupted in July 1997 and quickly raised fears of a global meltdown. On Oct 27, the Hang Seng Index in Hong Kong plunged 6%.

In the United States, the Dow fell 350 points to trigger a 30-minute halt in trading.

> The global financial crisis in 2008 is considered one of the worst since the Great Depression.

In began in 2007 with the US sub-prime mortgage crisis. Within a year, it became a full-blown global banking crisis. Markets around the world took a battering.

On Oct 6, the Dow dropped 800 points, closing below 10,000 for the first time since 2004.

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