An Important Lesson from the Black Monday Crash of 1987

question 16

Multiple Choice

An important lesson from the Black Monday Crash of 1987 and the tech crash of 2000 is that

• A) factors other than market fundamentals affect stock prices.
• B) the strong version of the efficient market hypothesis, that stock prices reflect the true fundamental value of securities, is correct.
• C) market psychology has little if any effect on stock prices.
• D) there is no such thing as a rational bubble.

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Definitions:

Negotiable Instrument

A paper ensuring the payment of a certain sum of money, either upon request or at a predetermined time, with the document specifying the person responsible for payment.

Rights

Entitlements or freedoms that are guaranteed by law, tradition, or ethical principles, which allow individuals to perform certain actions or claim specific benefits.

Maker

In legal or financial contexts, the party that creates or issues a promissory note, check, or other negotiable instrument.

Pay

The compensation or wage given to an employee in exchange for their work or service.