Index of Common Stock Prices
Rochelle Peng, Abishek Ramani, Richard Floyd
The Stock Crash Graph
ANALYSIS of boom
Stocks were getting recognition by 1923. Stock prices bobbed up and down throughout 1925 and 1926, followed by a strong upward trend in 1927. The strong bull market (heavy rise in the stock market) enticed many people to invest. And by 1928, a stock market boom had begun.
What was the difference in stock prices from 1920 to 1929?
This graph depicts stock market "boom" and "crash". The average price of stocks in 1920 was $7.60 and in 1929, the price rose to $24.00, an increase of $16.40!
During the roaring 20's, the economy within the US skyrocketed due to the grand emergence of technology and companies. Many citizens moved to the city and joined the work force. People received a greater income and decided to invest in stocks, making the prices increase.
The stock market boomed in the 20's because of easy loans. Almost anyone could get a margin loan and buy stock without actually owning it. They were all borrowing from the banks. Unlike the margin requirements today, people loaned large amounts that they did not have. In the 1920s, the buyer only had to put down 10 to 20 percent of his own money and thus borrowed 80 to 90 percent of the cost of the stock.
How do you account for the dramatic change in stock prices from 1929-1932?
Many investors invested their life savings and all the money they could get a hold of. As the prices continued to rise, some analysts began to warn that it can't last forever, but they were ignored. Finally, in October 1929, the buying craze began to stop, and was followed by an even wilder selling craze.
Due to easy loans, bankers got worried and started calling in the margin loans forcing people to sell or cover their positions. This created a panic. The roaring 20's came to an end with this panic. After so many people had pulled out of the market, the market crashed on a Tuesday. This would come to be known as Black Tuesday.
On Thursday, October 24, 1929, stock prices began to fall and fall. Investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars, and it took exchange clerks until five o'clock AM the next day to get everything organized. By the following Monday, the people finally realized what had happened and people panicked! Thousands of people were left with no money. The worst part was that they were ordinary people. Banks across the nation had been and were closing due to the failing market. By the end of the year, stock values had dropped by billions of dollars. This was the beginning of the great depression.
- "The Stock Market Crash OfÂ 1929." About.com 20th Century History. N.p., n.d. Web. 21 Mar. 2013. <http://history1900s.about.com/od/1920s/a/stockcrash1929.htm>.
- "Stock Market." ThinkQuest. Oracle Foundation, n.d. Web. 21 Mar. 2013. <http://library.thinkquest.org/J001569/st.html>.