Last Updated on November 4, 2022 by admin
The first instance was just before the 1929 crash that ushered in the Great Depression. At that time, the stock market had been on a tear for almost a decade, reaching new heights seemingly every day. However, behind the scenes, things were not as rosy as they appeared. Stocks were becoming increasingly overvalued, and many people were investing with borrowed money.
The other instance was just before the 1987 stock market crash. Again, stocks had been on a tear for several years, and again, they were becoming increasingly overvalued. This time, though, there was another factor at play: computer-driven program trading. Large institutional investors were using computer programs to buy and sell large blocks of stock in rapid succession, driving prices up and creating a “Feedback Loop.”