Case Study: Black Monday

October 19, 1987: Black Monday, the worst single day in Stock Market history. The Dow dropped 508.32 points, losing 22.6% of its value, as compared to 12.82 percent on October 29, 1929. In the aftermath, much of the blame fell on computers. In particular, the fact that roughly one third of the stock sales were automatic, initiated by index arbitrage computers, caused many to question the power given to computers in the exchange. The Washington Post headline "Stock Market Suffers Largest Loss in History As Dow Industrial Average Drops 508 Points; Plunge Blamed on Anxieties And Computerized Trading" is typical of the immediate response. While computer technology had a significant role in making the crash worse, it wasn't the fault of program trading.