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*Is there an objective definition of a crash?
**Barro and Ursua 2009: multi-year real returns of –25% or less. They also define a depression as multi-year macroeconomic declines of 10% or more. Crashes and correlated with minor depressions 31% of the time, and major depressions 10% of the time. In reverse, minor depressions are associated with crashes 71% of the time and major ones 92% of the time.... Part of this analysis entails splitting the sample into different “bins” or categories, defined by the magnitudes of the stockmarket crashes or by the type of environment that characterized those events; for example, wars, currency or banking crises, and periods of global economic distress.
**Mishkin and White 2002: On the face of it, defining a stock market crash or collapse is simple. When you see it, you know it. However, attempting a more precise definition and measurement over the course of a century is more difficult. ... As both fell slightly over 20 percent, a 20 percent drop in the market is used to define a stock market crash. The fall in the market, the depth is, however, only one characteristic of a crash. Speed is another feature. Therefore, we look at declines over windows of one day, five days, one month, three months, and one year....
*Is there a taxonomy of stock market crashes?
**Mishkin and White 2002: The description of the fifteen episodes of twentieth century stock market crashes suggests that we can place them into four categories. 1. Episodes in which the crashes did not appear to put stress on the financial system because interest-rate spreads did not widen appreciably. These include the crashes of 1903, 1940, 1946, 1962 and 2000. 2. Episodes in which the crashes were extremely sharp and which put stress on the 31 financial system, but where there was little widening of spreads subsequently because of intervention by the Federal Reserve to keep the financial system functioning in the wake of these crashes. These include the crashes of 1929 and 1987. 3. Episodes in which the crashes were associated with large increases in spreads suggesting severe financial distress. These include the crashes of 1907, 1930-33, 1937,
1973-74. 4. Episodes in which the crashes were associated with increases in spreads that were not as large as in the third category, suggesting some financial distress. These include the crashes of 1917, 1920, 1969-70 and 1990.
*Are there standard measures of a crash?
**First drop from peak
