Introduction

Abstract

Financial markets at all times fascinated people trying to predict price movements and making money out of it. Fortune-tellers and self-made market prophets often tried to influence the market participants by their forecasts, very often not to their own disadvantage. However, following such a forecast and putting all one’s eggs in one basket is a very risky thing to do. Of course, if prices move in the investor’s favour, he might get rich. But unfortunately, bad things happen. On Black Friday, October 25, 1929 a tremendous market crash finished ten bullish years of increasing stock prices, leaving millions of people with empty pockets and starting one of the most significant depressions of the modern age. On Black Monday, October 19, 1987 the Dow Jones Index lost 23% or 500 points within minutes while it increased by only 1700 points over the previous five years. Could traders have known before about the forthcoming worst-case events?