Why did the stock market crash in 2008?

Could a stock market crash in 2008 have been avoided/deferred if every agent in the stock market colluded (hypothetically) to keep share prices from plummeting in response to the housing burst?

  • Why is a stock market correction necessary?

  • Answer:

    It could never happen as most large investors do not choose to sell during a panic, they MUST sell because of external demands on the capital they have tied up in their stock portfolio. Many large investors use margin, or borrowed capital, to buy their stocks. When the economy begins to seize up because of panic, banks require larger deposits for collateral which forces investors to sell shares to cover the demand.  The only way that your scenario could work is if people did not invest with borrowed capital. However, as far as I understand market capitalism, without leverage, markets would not grow fast enough for people to have any incentive to invest in the stock market to begin with,

Marc Spindel at Quora Visit the source

Was this solution helpful to you?

Related Q & A:

Just Added Q & A:

Find solution

For every problem there is a solution! Proved by Solucija.

  • Got an issue and looking for advice?

  • Ask Solucija to search every corner of the Web for help.

  • Get workable solutions and helpful tips in a moment.

Just ask Solucija about an issue you face and immediately get a list of ready solutions, answers and tips from other Internet users. We always provide the most suitable and complete answer to your question at the top, along with a few good alternatives below.