J. McDowell: A Look at the Market’s Reaction to the Announcements of SEC Investigations

April 1, 2005

The Securities and Exchange Commission was formed as a result of the stock market crash of 1929. During the crash, the market value of securities listed on the New York Stock Exchange dropped 83%, from $89 billion to $15 billion. Some of the causes of the crash were found to be a pre-crash speculative frenzy, artificially inflated trading activity, false and misleading information published by companies listed on the exchange, and insider trading.