BROWSE

Panic Selling

Definition

Panic selling is a wide-scale selling of an investment which causes a sharp decline in prices. Specifically, an investor wants to get out of an investment with little regard of the price obtained. The selling activity is problematic because the investor is selling in reaction to emotion and fear, rather than evaluating the fundamentals. Most major stock exchanges use trading curbs to throttle panic selling, providing a cooling period for people to digest information related to the selling and restore some degree of normalcy to the market.

What is 'Panic Selling'

Wide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment, with little regard for the price at which they sell.

Explaining 'Panic Selling'

The main problem with panic selling is that investors are selling in reaction to pure emotion and fear, rather than evaluating fundamentals. Almost every market crash is a result of panic selling. Most major stock exchanges use trading curbs and halts to limit panic selling, to allow people to digest any information on why the selling is occurring, and to restore some degree of normalcy to the market.


Further Reading


Alexander Hamilton, central banker: crisis management during the US financial panic of 1792
www.jstor.org [PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …

The panic effect: possible unintended consequences of the temporary bans on short selling enacted during the 2008 financial crisisThe panic effect: possible unintended consequences of the temporary bans on short selling enacted during the 2008 financial crisis
heinonline.org [PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …

The Effect of Short-selling Mechanism on the Volatility of Stock Markets: Evidence from Hong Kong Market <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZQDB200802013.htm' />The Effect of Short-selling Mechanism on the Volatility of Stock Markets: Evidence from Hong Kong Market [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZQDB200802013.htm'>PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …

A panic-prone pack? The behavior of emerging market mutual fundsA panic-prone pack? The behavior of emerging market mutual funds
link.springer.com [PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …

Financing banking crises: lessons from the panic of 1907Financing banking crises: lessons from the panic of 1907
www.sciencedirect.com [PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …

Stock market panics: A test of the efficient market hypothesisStock market panics: A test of the efficient market hypothesis
www.tandfonline.com [PDF]
… Professor of the History of Financial Institutions and Markets, and professor of economics, at the … New York, and Charleston in early 1792, in the midst of the panic; launched a … 10 Douglas Irwin, The Aftermath of Hamilton s Report on Manufactures, Journal of Economic History 64 …



FAQ


What is a stock market crash?

A stock market crash is a sudden dramatic decline of stock prices across a major cross-section of stocks, resulting in a significant loss of paper wealth. Crashes are driven by panic selling and underlying economic factors. They often follow speculation and economic bubbles.

What causes crashes?

Crashes are caused by both external events (e.g., wars, large corporate hacks, changes in federal laws and regulations) and internal issues (e.g., management failures).

How do you define the term "crash"?

A crash is defined as a 20% drop from the peak of a bull market to the bottom or bear market phase.

Are there different types of crashes?

Yes, there are different types that can be identified based on their causes and effects. These include speculative bubble crashes, panics, corrections/bear markets, hyperinflationary crises, currency crises, debt crises etc..

What does it mean when an asset has crashed?

When an asset has crashed it means that its value has fallen dramatically over time due to various reasons including speculation or other economic factors such as inflation etc... The price may recover in future but this depends on how long the asset was affected by these factors before recovering its value back again. For example if an asset had been affected for one year then it would take at least another year for it to recover its original value back again depending on how much damage was done during this period of time where the price fell drastically low compared to its original price before falling down drastically low compared to its original price before crashing down significantly low compared to its original price before crashing down significantly low compared to its original price before crashing down significantly low compared with other assets within the same sector or industry which were not affected by any type of

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