The “crash of ’87” was the most extreme stock market price jump of the twentieth century. The S&P 500 Index fell over 20 per cent in one trading day, measured by the change in closing prices from Friday, October 16, 1987 to the close the following Monday, October 19. But if the market were close to efficient then both these closing prices must be, to good approximation, “correct.” Let’s see what this implies.
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