Panic selling is a large-scale selling of an

investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

that causes a sharp decline in prices. Specifically, an investor wants to sell an investment with little regard to the price obtained. The sale is problematic because the investor is reacting to emotion and fear, rather than evaluating the fundamentals. Most major

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for th ...

s use

trading curbs A trading curb (typically known as a circuit breaker in Wall Street parlance) is a financial regulatory instrument that is in place to prevent stock market crashes from occurring, and is implemented by the relevant stock exchange organization. Si ...

to throttle panic selling, provide a cooling period for people to digest information, and restore some degree of normality to the market.

Causes

The panic is typically the "fear that the market for a particular industry, or in general, will decline, causing additional losses." Panic selling causes the market to be flooded with securities, properties or

commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

that are being sold at lower prices, which further stumbles prices and induces even more selling. Here are common causes for the panic: * High speculation in market (e.g. Dubai housing crash in 2009) * Economic instability (e.g. financial crisis in 2008) * Political issues

Examples

Stock market crash of 1929

After World War I, the United States experienced significant economic growth that was fueled by new technologies and improved production processes. Industrial production output increased 25% between the years 1927 and 1929. In late October 1929, the decline began in the market and led to panic selling as more investors were unwilling to risk additional losses. The market sharply declined and was followed by the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

Financial crisis of 2008

The mortgage crisis led to public concern over the ability of financial institutions to cover their exposures in the

subprime loan In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subpri ...

market and credit default swaps. As more financial institutions such as Lehman Brothers and AIG reported their failures, the market instability deepened and more investors withdrew their investments. In October, the stock market crash occurred. Dow Jones Industrial Average fell 1,874 points or 18.1% during Black Week which began on October 6. In that same month, S&P 500 and the Nasdaq Composite reached their lowest level since 2003.

Dubai housing crash of 2009

Dubai had a significant financial crisis in which its debt accumulated to $80 billion. The state-owned holding company, Dubai World, had liabilities of $60 billion. Its real estate subsidy was at risk to

default Default may refer to: Law * Default (law), the failure to do something required by law ** Default (finance), failure to satisfy the terms of a loan obligation or failure to pay back a loan ** Default judgment, a binding judgment in favor of ei ...

on repayment of bonds, yet the Dubai government was unsuccessful to make a rescue package for the company. The debt problem of Dubai World triggered mass

speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline i ...

in the property market. In the first quarter of 2009, house prices in Dubai fell 41%.

Gold price plunge

Many people invest in gold primarily as a hedge against inflation in periods of economic uncertainty. During the second quarter of 2011, the gold price hiked 22.69% and reached its highest price, at $1907. On September 23, 2011, the gold price plunged $101.90, or 5.9%, in regular trading, which was the first $100 daily price drop since January 22, 1980. The gold price had reached its top, but the global economy was declining. Investors had a growing concern in the global economic decline, and fear were raised of potential price fall. Panic selling occurred in the gold market and caused the price to plunge.

References

{{Reflist Financial problems Investment