It’s time to consider the possibility of a Mega financial crisis in the month of September 2015 or earlier. At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day – and tell you how to profit from it. We know the best investments are often the hardest to find.
The days surrounding the stock market crash of 1929 were especially painful for investors who had borrowed money to purchase stocks that had become worthless or close to it. The situation influenced what became a major turning point for the American economy because many of these borrowers, who had leveraged themselves considerably in an effort to participate in the bull market , were ruined financially.
When you discover that major market outcomes are well known before they occur, and trust me all successful pro traders and all large trading houses do or they wouldn’t be where they are today, it’s captivating to observe the string of human behaviors that are, quite simply, caused by their result.
In addition, stock market expectations are of methodological interest because the history of stock returns and their daily realizations are public information, enabling researchers to investigate how news affects the updating of beliefs without the need to adjust for differences in private information.
In order to see the effect of the crash on the cross-sectional heterogeneity of expectations (which we call disagreement), we look at regressions in which the left-hand side variables are the absolute values of the residuals from the previous regressions.