Aug 5 2021, 10:44 PM
QUOTE(RigerZ @ Aug 4 2021, 07:12 PM)
Take for example the March 2020 crash due to COVID.
https://en.wikipedia.org/wiki/2020_stock_market_crash
Investors globally panic-selling which caused major indices like DJI, S&P 500 to crash.
How does this then cause individual company stocks locally to crash together?
Is it a domino effect that when major indices crash, other indices (ours being KLCI) will "just follow"? How does the chain reaction mechanism work here?
Then when KLCI crashes, local investors panic sell which cause company stock prices to drop?
Indices are based on the underlying prices. It’s rather the underlying stocks in the index which crash which then causes the index to crash. Not the other way round.https://en.wikipedia.org/wiki/2020_stock_market_crash
Investors globally panic-selling which caused major indices like DJI, S&P 500 to crash.
How does this then cause individual company stocks locally to crash together?
Is it a domino effect that when major indices crash, other indices (ours being KLCI) will "just follow"? How does the chain reaction mechanism work here?
Then when KLCI crashes, local investors panic sell which cause company stock prices to drop?
Then there’s the algorithms who sell based on market sentiments. So automatically they also sell. Then more people see prices crashing, then more people sell. The chain effect will then start.
This post has been edited by kelvinlym: Aug 5 2021, 10:45 PM
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