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The Great Crash

The Great Crash of 1929

FIFTY YEARS AGO, on Tuesday 29 October, the boom in the price of stocks and shares on the New York stock exchange came to an abrupt end in what has gone down in history as the Great Crash.

Stocks and shares are titles to ownership of part of a business. They entitle their owners to a percentage of the profits of that business in the form of dividends or, in the case of certain kinds of shares, fixed interest payments. In theory the price of a share reflects the value of the firm's assets. In practice it fluctuates with the firm's profit-making record and expected profits. It is this latter that introduces an element of gambling into shareholding, since the firm can never know in advance whether or not it will in actual fact make the hoped for profits. If it doesn't then the price of its shares will fall and the shareholders will suffer a loss. If it does then the price of its shares will increase and the shareholder will receive a capital gain as well as a dividend.

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