World War I brought on a new era for the stock market. Through all of the confusion, uncertainty and fear, all major exchanges saw no choice but to shut down. Foreign buying and selling or stock ceased and the promise of the birth of a truly global stock market halted. Europe and North America faced severe financial hardships.
The New York Stock Exchange was now home to the largest stock market in the world, having surpassed London’s during the years of World War I. At this time, in New York, it was mainly a market for domestic American securities and not international exchange. This was driven by Americans buying American companies.
Dividends were very important at this time since the price an investor was willing to pay for a stock reflected
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In the late 1920’s, there was a lot of economic disorder which was contributed to the high tax rates introduced during the war that had still not returned to normal. It was voiced by businessmen with strong ties in the business community that if the government would get out of the way, business would bring about a quick return to prosperity and higher stock prices. The market most likely would have risen again regardless because of the growth in the economy and in corporate earnings but the increase in American stock prices in the 1920’s was sped up by the growing acceptance of forward –looking standards of appraisal of shares of …show more content…
The world was entering the digital age and people were no longer held back, they could go anywhere and the opportunities were endless for control and change. With the new wave of interconnectedness, failure in one location could trigger failure elsewhere. The following examples portray this domino effect.
• There was the crash if 1973 caused by the collapse of the Bretton Woods system, the devaluation of the dollar and the oil crisis.
• On Monday, October 19th, 1987 a crash was caused by program trading, which is a sample of stocks that are traded according to the evaluation of the market by pre-determined conditions. It originated in Hong Kong and in the end the US suffered a loss of 22.68 percent and it took nearly two years for levels to stabilize.
• There was a smaller crash in 1989 on October 13th, as a result of the failure in the leveraged buyout of a corporation worth $6.75 billion.
• The 1997 Asian Financial Crisis was triggered by the collapse of the Thai Baht. The government of Thailand did not have enough foreign currency to back its fixed rates. This rapidly spread to Hong Kong, Malaysia and the Philippines, dragging them all into financial