Question

What caused the stock market crash of october 1929

Answer 1

In short, excessive speculation.

During the 1920s, the United States economy saw a period of massive growth and everybody wanted in. So, many people overleveraged themselves and got into financial speculation. People did well for a while but the music eventually stopped as the market hit limits and the house of cards came tumbling down as many people didn't have the money to back their bets.

Answer 2

Answer:  Investors and banks were involved in the use of borrowed money to buy stocks for which investors didn't actually have funds to invest.

Explanation:

There was much speculative buying on the stock market in "the Roaring '20s," as the decade was known.  In the 1920s, people were so eager to invest and earn profits through the stock market that they bought stocks "on margin."  In other words, they paid for only a marginal percentage of the stocks with their own funds, and borrowed bank funds for the rest of the purchase.  That meant the banks were complicit in this arrangement too, by allowing those sorts of loans. By the late 1920s, 90% of the purchase price of stocks was being made with borrowed money.  This inflated the market in a way that spiraled out of control, and in 1929 the market crashed.