How did margin buying contribute to the outbreak of the Great Depression?
Because of margin buying, investors stood to lose large sums of money if the market turned down-or even failed to advance quickly enough. The average P/E (price to earnings) ratio of S&P Composite stocks was 32.6 in September 1929, clearly above historical norms. Most economists view this event as the most dramatic in modern economic history. ChaCha on!
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