The Wall Street Crash of 1929, also known as the great crash, was undoubtedly the worst stock market crash in the history of the US. The initial crash occurred on Thursday 24th October, 1929 (-9%) and further crashes occurred on Monday 28th October (-12.8%) and Tuesday 29th October (-11.7%). These crashes caused panic in the market that would last for a further three years. When the Dow Jones finally hit its record low in July 1932, it had fallen by an incredible 89%. The Wall Street crash of 1929 was one of the events that led to the great depression (years of economic decline in industrialised nations).
(source: BBC Business )
Buying on margin has been cited as the major reason for the 1929 crash. Margin buying was then not controlled by the government and people were borrowing up to 90% of the stock price from their brokers, meaning to buy a $10 stock, only $1 was needed.
After the financial boom of the mid 1920's, people bought on margin as they thought the stock market was a guaranteed way of making money and it would keep on rising. However when the bubble burst (due to decreased car sales, steel production and housing construction) people lost their money a lot faster, and record 12.9 million shares were traded on Thursday 24th October, 1929.
