Black Monday Research Articles

When transactions turn awry: Infrastructural ambivalence in financial security

AbstractThis article conceptualizes financial transactions as parts of financial infrastructures. Not only do transactions perform services for the economy, mainly in the area of calculation and pricing, but there is also merit in a conceptually infrastructural view on transactions which uncovers their ambivalence for the stability of the financial system. This is based on a conceptualization of infrastructures that distances itself from inherited modernist notions of the completeness, full operability, and functional integration of infrastructures, and instead highlights the constitutive incompleteness, error-proneness, and looming disintegration of infrastructures owing not to external threats but to their very modes of operation. The article analyzes two post-crisis reports that try to sort out this infrastructural ambivalence of transactions, and, in that attempt, mobilize different imaginaries. In the Brady Report following Black Monday of 1987, the imaginary of the efficient competitive market was cited to stabilize the boundary between functional and dysfunctional transactions. In the FCIC Report reflecting on the subprime mortgage crisis, a quasi-sociological diagnosis of mushrooming, and morally problematic transactional relationships were invoked to separate functional from dysfunctional intermediation by financial transactions.

Momentum Origin and Investor Behaviors on Wall Street

The Efficient Market Hypothesis (EMH) asserts that consistently outperforming the market is implausible because market prices promptly incorporate all available information. However, the momentum strategy has demonstrated consistent profitability, which poses a significant challenge to the EMH and suggests the presence of factors that extend beyond existing theoretical frameworks in influencing price movements. Here we present a model attributing changes in asset return to behavior interactions between liquidity takers and providers that directly impact price formation and discovery processes. The analysis of the measured behavior of liquidity takers and inferred market microstructure due to behaviors of liquidity providers generates signals relating to the forming, terminating, and reversal of price momentums. Applying these signals to the 1987 market crash yields warning flags about the looming crisis weeks before the sudden market plunge on Black Monday. As market crises always correspond with substantial negative price momentum, our model can serve to mitigate or avoid catastrophic investment losses during such events.

Literature Review on Detecting Bubbles in Stock Market

Stock market bubbles are times when valuation dynamics are momentarily explosive. Stock bubbles can be interpreted as a deviation of stock prices from their fundamental value. LPPLS is one of model to calculate bubble, which assuming that an asset's observed price trend during a bubble era differs from its intrinsic fundamental value. This research is qualitative study or descriptive research to review the LPPLS as a model to calculate bubbles in stock. This study uses secondary data sourced from articles which published in Scopus Indexed International Journal. The conclusion of the research that the LPPLS model can calculate, predict and identify accurately bubbles related historical event such as the black Monday, dot com, and subprime crisis periods. The LPPLS model has the advantage, including construct end of bubble signals accurately.

The Illocutionary and Perlocutionary Act in Black Monday TV Series

This study was done to find out types of illocutionary acts produced by four main characters in episode 5 in season 1 of Black Monday the series, and to reveal the perlocutionary acts reacted by the interlocutors in responses to the illocutionary acts of four main characters in episode 5 in season 1 of Black Monday the series. In this study, the writer used the speech acts theory by Cutting (2002) and Paltridge (2012), the theory of locution, illocution and perlocutionary act by Paltridge (2012). Besides that, this study was done using a qualitative approach. The result of this study showed that the main characters mainly used representative, expressive, and directive when talking to their interlocutors and the perlocutionary acts followed the main characters’ utterances. The conclusion is that status and ethnic superiority on Black Monday influenced the utterance when main characters said their utterances.

Asymmetric volatility spillover between hospitality sub-sectors during COVID-19: evidence from the USA

PurposeThis article examines dynamic volatility spillovers between stock index returns of four main hospitality sub-sectors in US during the coronavirus disease 2019 (COVID-19) pandemic. These are tourism and travel, hotel and lodging, recreational services and food and beverages. Volatility spillovers are explicitly used as accurate and informative proxies for risk contagion between sectors during turbulent times.Design/methodology/approachThe authors employ dynamic conditional correlation-generalized autoregression heteroskedasticity (DCC-GARCH) and wavelet coherence analysis (WCA) to analyze the phenomenon. The authors’ timeframe is divided into three main sub-periods, namely the pre-pandemic, the first wave and the second wave periods.FindingsThis study’s results reveal immense negative shocks in returns of all four sub-sectors on the Black Monday (8th March 2020). Moreover, high volatility persistence was observed during both waves with an exception of tourism and travel which exhibited lower volatility persistence during the second wave. The authors discovered magnified contagion effects between tourism and travel, hotel and lodgment and recreational services during the first wave of the pandemic with tourism and travel being the main volatility transmitter. Lower magnitudes of spillovers were observed between food and beverages and other sub-sectors with a decoupling effect being evident during the second wave.Research limitations/implicationsThis study’s findings contribute to the contagion theory by providing evidence of disproportional volatility spillover among hospitality sub-sectors despite being exposed to similar turbulent economic conditions.Practical implicationsCrucial implications can be drawn from this study’s findings to assist in risk management, asset valuation and portfolio management. The importance of close monitoring, safety measures, international diversification and adequacy of liquid assets during health crises cannot be stresses enough for hospitality firms. Retail investors, speculators and asset managers can take advantage of this study’s findings to design trading strategies and hedge against risk.Originality/valueA body of knowledge pertaining to effects of crises such as COVID-19 on hospitality stocks has been proliferating. Nonetheless, there is still a relative dearth of empirical literature on volatility spillover between hospitality sub-sectors especially during periods of rising economic uncertainties.

“Dig if you will the picture…”: New Television, Myth, Black Monday and the 1980s

Cet essai se penche sur l’apparition récente des années 1980 comme cadre d’une grande partie des séries de la « nouvelle télévision ». Je soutiens que cette référence vise à exploiter et à présenter les années 1980 comme une sorte de milieu mythologique pour notre présente compréhension de soi. Comprendre ce point sur les années 1980 et la mythologie nous permet de situer certaines idées ontologiques et philosophiques concernant la nouvelle télévision. Dans ce qui suit, je développe cette approche sur deux fronts : d’abord, avec une discussion plus générale des spécificités philosophiques du média que constitue la nouvelle télévision, et, ensuite avec un examen plus spécifique de la série Black Monday (Showtime, 2019-).

Circuit Breaker Effects on Market Players Psychology and Behavior

Since the Black Monday of 1987, Stock Markets worldwide have adopted several financial regulatory measures to cease the free flow of market crashes during times of extreme volatility. Circuit Breakers, a.k.a trading curb is a regulatory instrument that halts trading and stabilizes the extreme volatility. This research paper analyses Circuit Breakers in the Stock market, their impacts, and their effects on market behavior. The study reviews the history of the circuit breaker implementation and the impact it causes on market behaviors such as volatility, the difference in return pre and post-circuit breaker events. This study considers Nifty 50 index data for a total period of 60 days, 30 days prior, and 30 days post-implementation of circuit breakers. The thesis explores the importance of the market-wide circuit breaker in India and the history of the circuit breaker. This research uses Bloomberg data on the closing price and volume of the Nifty 50 index on 12 separate windows, such as pre-and post-circuit breakers of respective six times as an industry-wide circuit breaker the Indian stock market. The sample determines the disparity in return and volatility between the pre and post-circuit breaker periods based on the mean and standard deviation. The impact of a circuit breaker lasts for up to 10 days in most cases and up to 20 days in some cases; however, the impact of a circuit breaker lasts for up to 30 days in some cases.

Global Capitalism as Blood Sacrifice: Mainstream American Comic Books and Depictions of Economic Inequality.

The past few decades have witnessed unprecedented global economic catastrophes that exacerbated pre-existing socioeconomic inequalities. Although many scholars have attributed the resulting social harms to the failures of neoliberal capitalism—and recognize it as criminogenic—the logics upholding the economic order continue to hold sway among the public. Given that these logics are commonly reinforced through media and popular culture narratives, in this paper we explore how economic inequalities are portrayed in American comic books. We employ a thematic analysis of comic book depictions of mass economic destruction and economic inequality from the financial crisis of 2008 through the Occupy Wall Street movement to the more recent characterization of a post-capitalist existence under the throes of a global plutocracy. In doing so we recognize the potential for re-imagining alternatives to neoliberal capitalism, taking a critical criminological lens to the comic books. We then place The Black Monday Murders, a culmination of portrayals of economic inequality and related violence, in the context of more mainstream comic book depictions and discuss how this particular work exemplifies a rising theme in comics—a purported trade-off between global capitalism and human life, a discussion point that explicitly entered American public discourse during the coronavirus pandemic.

The Typology of The Global Financial Crisis and the Solution in Islamic Economic Perspective

Economic globalization has triggered more frequent financial crises. Financial crises constantly repeat every specific time. This article reviews the typology of the global financial crisis and the solutions offered by Islamic economics. The research uses a historical approach. Five typologies of the global financial crisis, namely: Speculative bubbles and Crash, Sovereign Default, Balance of payment crisis, systemic banking crisis, and Energy Crisis. The financial crisis typologies of Speculative bubbles and Crash are the Wall Street Crash of 1929 and the Great Depression, Black Monday, Japanese Asset Bubble, Dot-com Bubble, US Saving & Loan Crisis, and the Suprime Mortgage Crisis. The financial crisis typology of Sovereign Default is the Latin American Debt Crisis, the Mexican Peso Crisis, the Asian Financial Crisis, and the European Crisis. The typology of financial crisis Balance of payment crisis is the Mexican Peso Crisis and the Russian Financial Crisis. The financial typology of the energy crisis is the oil crisis. Islamic economics offers a solution so that the financial crisis does not recur in the future. The prohibition of riba, maysir and ghaarar transactions offers a solution to the financial crisis typology of Speculative bubbles and Crash. The principle of equity financing in Islamic economics is a solution to the financial crisis of the Sovereign Default typology. Islamic economics prioritizes the financial sector, which is in line with the real sector as a solution to the financial crisis typology of the Balance of payment crisis. The value of morality (akhlakul karimah) is a solution to the financial crisis because of the moral hazard.

A multicountry measure of comovement and contagion in international markets: definition and applications

This paper introduces a new measure of comovement and contagion of crises between countries, applies it to 16 world crises, including the current COVID-19 pandemic, and provides insights regarding the occurrence of contagion during these crises. Our measure demonstrates several important advantages over the extant measures of contagion. Traditional measures of contagion, such as increase in correlation, could be limited in scope since they are bivariate, whereas contagion is often a regional or global market phenomenon. The multiple comparisons that the binary correlations require in such cases could yield inconclusive or contradictory results and fail to capture the broad effects of the crisis on the regions. Moreover, during crises, a country’s stock market volatility often increases, a phenomenon that could lead to a spurious indication of increased correlation with other countries (contagion). Corrections for this bias have been suggested, but they could adversely affect the power of the contagion tests and fail to detect genuine contagion. Using simulations, we show the robustness of our measure to changes in volatility and demonstrate its power to affirm instances of genuine contagion. Support for the power of our measure relative to an extant leading measure of contagion is also provided by analysis of the cases of the 1994 Mexican peso crisis, the 1997 East Asian crisis, and Black Monday, the 1987 US stock market crash.

How a Company Could Benefit from the Volatility of Prices: The Shipping Industry as a Case Study

Statisticians, almost 190 years ago, established the law of the “large numbers” and the “central limit theorem”-CLT. The CLT led to “Normal Distribution”, which determines the 99.6% probability for something to happen, provided the number of repetitions → ∞. This tool, despite its formidable equation, is based on two simple parameters: the mean μ and the variance σ2. “Normality” was so strong1 that risk is defined as the deviation from μ. Surprises came mainly in 1894, 1929, 1987, and in 2008, when the deviations reached an unbelievable 22σ (Black Monday)! Research thereafter focused on cases where σ > 3, known as the “fat tails”. The fat-tailed distributions were specified by Cauchy (in 1824) and identified in financial markets by Mandelbrot B and in shipping markets by Goulielmos A. The yardstick of risk σ, replaced by α, and the shape of the distribution allowed for longer tails, etc., i.e., a departure from normality, called leptokurtosis. The shipping industry suffered, from 1741, from 22 cycles, till 2022 (May). But this was not really a surprise. The Surprise was the decreasing duration of the cycles over time, from 15 years to 8, the reduction of good times, and the increase of bad years, which emerge now more frequently! Any symmetry assumed between peaks and troughs in freight rate markets proved to be dangerous! History is useful, but it depends on the assumption that it is repeated2. Models to forecast freight rates and α in the shipping industry failed, despite the use of nonlinear models and computer software. The appearance of the “Joker” destroyed all forecasting attempts! The purpose of this work was to indicate chronologically the opportunities that have been created by volatility, for shipowners, mainly from the very volatile prices of the newly-built, but also of the second-hand ships in liquid and dry shipping sectors. As shown the 30% to 51% of the total cost is determined by these prices, and thus a competitive advantage can be sought after the ship has been built or bought. We used “suitable” diagrams of historical time series related to shipping prices and showed how a bad economic phenomenon like wild volatility could be used to achieve an excellent performance. The whole analysis is based on the principle: “how to exploit opportunities in times—which become now frequent—of wild economic variations?”

Do Socially Responsible Indices Outperform the Market During Black Swan Events: Evidence from Indian Markets During Global Financial and COVID-19 Crises

This paper aims to examine and compare the effect of black swan events on the performance of companies with strong Environmental, Social, and (Corporate) Governance (ESG) backgrounds with that of other companies. Compared to established firms, companies with ESG backgrounds are perceived to be stable that will help them outperform established companies that are volatile during times of crisis. This research focuses on SENSEX for conventional market index and BSE GREEENEX and S&P BSE CARBONEX for ESG indices. We evaluated performances of the three indices during U.S. Debt Ceiling Crisis (2011-12), Black Monday China, BREXIT and Demonetization (2015-16), and COVID-19 (2020) crisis. We checked whether ESG indices outperformed conventional index significantly using Student's T-test. We have also compared the volatility of the three indices during the different black swan periods using the GARCH model.

Dynamic volatility spillovers between industries in the US stock market: Evidence from the COVID-19 pandemic and Black Monday

We examine the volatility spillovers among various industries during the COVID-19 pandemic period. We measure volatility spillovers by defining the volatility of each sector in the S&P 500 index and implement a static and rolling-window analysis following the Diebold and Yilmaz (2012) approach. We find that the pandemic enhanced volatility spillovers, which reveals the financial contagion effects on the US stock market. Second, there were sudden, large changes in the dynamic volatility spillovers on Black Monday (March 9, 2020), much of it due to the energy sector shock. These findings have important implications for portfolio managers and policymakers.

ICHIMOKU TRADING STRATEGY DURING COVID-19 BUBBLE

ABSTRACT We show that technical trading rules based on the midpoint of high and low values can time the bubble's entry and exit, which is unique to this paper and known in technical trading circles as the Ichimoku Cloud. We detect a possible new bubble in the U.S. stock market in real-time using the Backward Supremum Augmented Dickey-Fuller technique (BSADF) and find several bubbles in the U.S. stock market over 1973-2020, including a new Covid-19 bubble. Previous studies have shown this to date stamp bubbles in the U.S. in real-time from 1928-2008. The bubble is based on pure speculation rather than fundamentals, and it shows annualized returns of 32% during the Covid-19 bubble with a standard deviation of 8%. In comparison, the market showed returns of 8% and a standard deviation of 9%. FRED Indicator indicated a recession from January 2020 – October 2021. It performs similarly in previous bubbles such as Black Monday (1987), Dot Com (2001), and Sub Prime Mortgage (2008). We compare its performance to the moving average. The results provide the Ichimoku Cloud validity in being used alongside the moving average in momentum studies. Keywords Ichimoku, Cloud, Bubbles, Asset Pricing, BSADF

A singular value decomposition entropy approach for testing stock market efficiency

This work proposed an approach to test the efficient market hypothesis (EMH) based on the singular value decomposition (SVD) entropy. The entropy is computed from the singular value distribution of a matrix formed by lagged returns up to a scale n. To decide whether a time series is predictable, the estimated SVD entropy was compared with a reference entropy obtained from uncorrelated (white noise) time series of the same size. The application of the method to the US stock markets (Dow Jones, Nasdaq and Standard & Poor-500) for the period 1980–2021 provided consistent results with previous reports. In this way, it was shown that the US stock markets in the scrutinized period have fulfilled the EMH most of the time, except for some periods that can be linked to important market events, like crises (e.g., 1987 Black Monday crash) and instabilities. In particular, the SVD entropy exhibited significant decreases in such events, which were interpreted as the formation of patterns with certain degree of predictability. Overall, the SVD entropy is a tool that can complement the existing nonlinear analysis methods to test the complexity of financial time series.

Loss of structural balance in stock markets

We use rank correlations as distance functions to establish the interconnectivity between stock returns, building weighted signed networks for the stocks of seven European countries, the US and Japan. We establish the theoretical relationship between the level of balance in a network and stock predictability, studying its evolution from 2005 to the third quarter of 2020. We find a clear balance–unbalance transition for six of the nine countries, following the August 2011 Black Monday in the US, when the Economic Policy Uncertainty index for this country reached its highest monthly level before the COVID-19 crisis. This sudden loss of balance is mainly caused by a reorganization of the market networks triggered by a group of low capitalization stocks belonging to the non-financial sector. After the transition, the stocks of companies in these groups become all negatively correlated between them and with most of the rest of the stocks in the market. The implied change in the network topology is directly related to a decrease in stock predictability, a finding with novel important implications for asset allocation and portfolio hedging strategies.

‘I’m Not Afraid of the Dark’

‘I’m Not Afraid of the Dark’

British Ornithologists' Union

The BOU is dependent upon a number of individuals whose contribution is scarcely visible, but without whom it would not be viable. Nigel Crocker is one such person, having served the Union in two key roles over many years: as Honorary Treasurer from 1984 to 2000, and subsequently as Chair of the trustees who look after the Union’s investments. Council is delighted to recognize Nigel’s 35-year contribution by the award of the Janet Kear Union Medal. Born in Devon, Nigel was brought up in Cornwall. His interest in birds was encouraged from an early age, both by a neighbour and his grandfather, who bought him his first pair of binoculars. At school he undertook a project on Barn Owls Tyto alba, exploring abandoned Cornish mine buildings to collect owl pellets, something that might not now be encouraged in an age of health and safety! After school, Nigel began a long career with the Trustee and Executorship department of National Westminster Bank, eventually reaching a senior management position. Like many bank employees he had to move around the country as he made his way up the bank hierarchy, with postings in Exeter, two spells in Gloucestershire, interrupted by a spell in Sussex where he met his wife Beryl. He eventually ended up working in Bristol and London, and they established the family home in Somerset near Chew Valley Lake and Blagdon Lake, where he and Beryl have lived for over 30 years Throughout, Nigel has contributed to ornithology in many capacities, notwithstanding the demands of career and family life. In Gloucestershire he undertook Marsh Warbler Acrocephalus palustris surveys for the Gloucestershire Trust for Nature Conservation (GTNC), was county wildfowl count organizer, RSPB and YOC group leader, and served on the Council of GTNC and the Gloucestershire Naturalists’ Society. In Sussex he ran birdwatching classes. He has participated in many BTO surveys and undertaken fieldwork for the Somerset Breeding Bird Atlas project. His particular interest is in waterbirds and waterside birds. Living in Somerset he has been able to witness close to home the colonization of Little Egretta garzetta, Great Ardea alba and Cattle Bubulcus ibis Egrets. Nigel joined the BOU at a time when membership applications were by nomination. One of Nigel's colleagues at National Westminster, Peter Wilkinson, was instrumental in Nigel's nomination, following Nigel's work on Marsh Warblers in the Severn Valley. It was Peter who persuaded Nigel to succeed him as Honorary Treasurer of the BOU in 1984. During Nigel's period as Treasurer, prudent action ensured that it was spared the effects of the Black Monday Stock Market crash in October 1987. In 1997, as Hon. Treasurer Nigel was part of the BOU's leadership team which was responsible for one of the most significant developments ever for the BOU; appointing a full-time administrator, Steve Dudley, when the then long-serving, part-time secretary, Gwen Bonham, chose to retire. The decision to invest more of the Union's resources in securing its long-term administration provided the platform on which all subsequent development and successes of the BOU have been founded. Nigel also served as the BOU’s representative on the UK Dependent Territories Conservation Forum. On his retirement as Hon. Treasurer in 2000, he kindly agreed to become one of the Union's investment trustees, and he has now served for over 20 years in this role. The Union is not alone in benefiting from Nigel's time and expertise. He has also served as a trustee of the Herbert Stevens Trust of the British Ornithologists’ Club and as Vice-chair of the Diocese of Bath and Wells and Chair of its Investment Committee. It is particularly appropriate that Nigel's service to the BOU is marked by the award of the Janet Kear Union Medal as Janet was one of the Presidents under whom Nigel served and they shared a lifelong association with waterbirds. Neil Bucknell

From Black Wednesday to Brexit: Macroeconomic shocks and correlations of equity returns in France, Germany, Italy, Spain, and the United Kingdom

AbstractThis paper investigates whether macroeconomic shocks, such as the UK's referendum decision to leave the European Union (“Brexit”), the 2008 Financial Crisis, the 1992 ERM Crisis (“Black Wednesday”), and the 1987 stock market crash (“Black Monday”), had a positive impact on portfolio risk diversification. We estimate weekly dynamic conditional correlations and then optimal sectoral portfolio allocations between 1973 and 2019. Our results show that correlations of equity returns increased as a consequence of economic integration among European countries from the mid‐1980s until the late 2000s, and decreased in the United Kingdom after Black Wednesday and the Brexit referendum. We tested the existence of a correlation change‐point on June 27, 2016 by applying Wied et al. (2012)'s [Econometric Theory, 28(3), 570–589] correlation structural break test, which we modified to account for dynamic conditional correlations. Application of this test confirms that the referendum date was a break‐point in nearly all UK manufacturing industries. The failure of Lehman Brothers and the 1987 stock market crash were also identified as structural breaks in equity correlations. Moreover, our findings suggest that the Brexit vote may constitute a long‐term trend reversal of the convergence of equity return correlations in European markets, akin to Black Wednesday, rather than a shock like the 1987 and 2008 financial crises, which merely intensified a historical upward trend in correlations of European equity returns.

Unfairly Defiled: A Long Term Perspective on Portfolio Insurance as a Strategy for Limiting Portfolio Losses

The invention of portfolio insurance as a strategy for limiting portfolio losses was introduced in the early 1980s and gained spectacular popularity throughout the decade, attracting between $60 billion to $90 billion from institutional money managers. The method provided downside protection against a long equity position by synthetically replicating a long put option using equity futures during an era when exchange-traded equity options were not sufficiently liquid. Unfortunately, the strategy came to a catastrophic end on the “Black Monday” of October 19, 1987, when the president of the New York Stock Exchange shut down the nascent technology used by index arbitrage program trading groups. This caused significant mispricings between futures and cash markets, making the required synthetic put option replication trading impossible. The portfolio insurance strategy was declared a complete failure and never has since regained widespread popularity. Three decades later, modern markets now fully embrace program trading, and the likelihood that program trading would be shut down for any reason ever again seems impossible. This paper examines how portfolio insurance would have performed during the 1991 to 2020 time period, during which 3 major stock market crashes occurred and program trading was never shut down. The paper concludes that portfolio insurance received unjust blame for the 1987 crash and its abandonment since then has been irrational and unfortunate for those seeking long equity exposure with a cost-efficient strategy for limiting portfolio losses.