Duration of Stock Market Crashes

In this paper, we investigate the episodes of stock market crashes in the United States since 1926. We define a crash as a period of time during which the stock market (measured by the CRSP Index) falls by 10% over its recent peak value. 35 episodes of crashes were identified during this period. When looking at the time to recovery for each one of these crashes, we see large heterogeneity. In this paper, we investigate the determinants of this heterogeneity. More specifically, we look to explain why some episodes take too long to recover, as others take shorter than expected. We provide economic and statistical explanations for the causes of these episodes.

Stock market crashes in the United States since 1926.