What is a Market Crash?

A market crash doesn’t have a specific definition, although the term typically means a sudden, rapid collapse in a broad stock index or related indices.

When we say market crash, we usually refer to a dramatic, unexpected decline in the prices of stocks. This market crisis is often triggered by certain economic, notable catastrophic events, and sometimes speculative factors.

Many market crashes have been a result of severe, one-day drops. And these market drops can last for a day or extended periods, making investors incur significant losses. The 1929 Great Depression, the Black Monday of 1987, and the 2020 COVID-19 are a few examples of major market crashes in history.

Market crashes have no specific percentage decline to define them, although expert investors are pretty capable of telling one when they see one.

Market crashes tend to have a heavy impact on th e economy and investors’ behavior. For the most part, the stock market is vital to a country’s economic performance. 1:33;07

During a market crash, some investors are driven to panic sell their holdings to avoid further losses.

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