Stock Market Crash

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Stock Market Crash

A stock market crash is a sudden decline of stock prices in stock markets. It

usually happens due to panic among stockholders and various economic factors. These

crashes usually occur after a long period of rising stock prices (due to going

speculations), when P/E ratios are far above their averages. According to Benjamin

Graham, the father of securities analysis, there are three main forces behind the market

crash: the manipulation of stocks, the lending of money to buy stocks and excessive


The most famous market crash, the Wall Street Crash of 1929, also known as

Black Tuesday, happened on October, 29 1929. It is regarded as a start of the Great

Depression. All of the three forces mentioned above contributed to this crash.

American economy was blooming in the 1920s. NYSE was the largest stock

market in the world. From 1920 till 1929 many stocks quadrupled in value. Thus, many

people invested their money in stocks, expecting to gain profit. It led to speculative

boom that took place in late twenties: the rising share prices were encouraging people

to invest even more. Many of the investors had to borrow money to buy stocks but they

only had to have 10% equity and 90% margin to buy securities. Speculations on stocks

stimulated further price rises and created an economic bubble. The P/E ratios in 1929

were far beyond historical norms. The high level of speculations increased anxiety of

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the investors, so when on October, 24 prices started falling, many investors decided to

sell their shares. The leading Wall Street bankers tried to stabilize the situation on

Friday, but could not find a proper solution. Over the weekend the market crash was

discusses in the newspapers and arose the panic among the stockholders. Thus, on

Monday Dow Jones fell more than 12%. To worsen the situation, telephone and

telegraph lines could not cope up with the increase of their usage and collapsed,

contributing to panic spread. ...

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This essay is written well, having a clear structure. I liked how the introduction defined the key terms in the question, and the conclusion relates directly back to the task set. The style could be improved slightly by using terms such as "in hindsight" or "it is now clear that" or "it depends greatly upon" to ensure the top marks are gained. Spelling, punctuation and grammar are strong. An essay to be admired!

The analysis is strong here, and technical terms are used throughout. I would've liked to have seen a bit more explanation of terms such as P/E or institutions such as FDIC - the acronyms are simply not enough to gain the highest marks. What I particularly liked in this essay is how they have explained the effects of each crash, talking about first tier impacts and second tier impacts. A good skill is displayed in describing the 1987 crash, with the essay explaining that the cause is still argued today. It is key in Business and Studies and Economics to show awareness that often there is no right solution or cause, and schools of thought change over time. It could've been relevant to talk about the Lehman Brothers incident in 2008 to extend the argument.

This essay engages superbly with the question, exploring the causes of a stock market crash and evaluating why significant crashes were caused. I liked how they used two historical crashes and one current financial crisis. If this essay wanted to improve, it would have been nice to see some evaluation as to whether the historic crashes could happen again for the same reasons, but this is only necessary as an extension.