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How Crises Impact Markets

Posted By Barry Ritholtz On July 9, 2005 @ 7:38 am In Markets,Psychology | Comments Disabled

Our friends at Stock Trader’s Almanac [1] sent along this table, noting how past terror events have generated different market reactions.

STA [1]: "When the market was in decline or weak, the terror attack merely seemed to accelerate the process. But with the Bali bombing, after the 2002 bottom, the market shrugged off the horrific event and never lost ground."


How Crises Impact Markets (Based on Dow Industrials)

Date Crisis 1-Day Change 1-Month Change Subseq. Low Change Days to Bottom Days to Recover 1-Year Change
12/7/41 Pearl Harbor Attack -3.5% -3.0% -8.8% 16 335 12.0%
Final Low -20.2%
6/25/50 N Korea Invades S Korea -4.7% -7.8% -12.0% 18 81 28.8%
10/15/62 Cuban Missile Crisis -0.1% 6.7% -5.4% 8 16 33.8%
11/22/63 Pres Kennedy Shot -2.9% 3.5% -2.9% 1 4 25.0% 
10/19/73 Arab Oil Embargo -0.3% -10.5% -18.2% 47 4 -25.5%
Final Low -40.1%
8/2/90  Iraq Invades Kuwait -1.2% -9.9% -18.4% 70 193 26.2%
9/11/01 Terrorists Attack USA -7.1% -3.8% -14.3% 10 59 -3.0%
Final Low -24.1%
10/12/02 Terrorists Attack Bali 0.3% 6.5% N/A N/A 1 32.9%
3/11/04 Terrorists Attack Madrid -1.6% 2.1% -1.9% 4 6 6.4%
Averages -2.3% -1.8% -15.1% 93 206 21.3%
7/7/05 Terrorists Attack London 0.3% ? ? ? ? ?

 

Thanks for the chart, Jeff.


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[1] Stock Trader’s Almanac: http://www.stocktradersalmanac.com/

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