The functions of speculation in economy: an investigation on the New York stock exchange crash (1929-39)

Abstract

The importance of the role played by a stock market in the economic condition of a country is undeniable. An organized and stable stock market reflects an economic stability; progressive economic growth as well as reflecting the economic prosperity. In contrast, an unstable stock market indicates the vulnerable economical position of a country. The main aim of this article is to focus on the negative consequences of speculation and to discuss deeply on its role in financial crises. For this purpose, the crash of the New York Stock Exchange in 1929 will specifically be referred to because it was the world’s greatest economic crash. Consequently, an unstable stock market has caused economic crashes not only for the country in which it occurs but also affects other countries because of interdependent economies. The best example of this situation was the World Great Depression which threatened the world economy in the 1930s.