The Threat Of The Stock Market

In the post-2008 crash era, the potential for market crashes to wreak havoc is well known. Economics applicants should have noted the news late this summer reporting the woes on global indices, such as the FTSE 100 losing almost 4.5% of its value in half a day’s trading in response to poor Chinese data.

While the UK and other western economies have had something of a hard time of it since Lehman Brothers’ collapse, most would probably assume that stock market volatility is not the primary cause of concern for less developed countries.  

However, recent research from Lloyds of London and the University of Cambridge has highlighted the damage that market crashes could cause in African states. Geographers will be interested to note that more than 50% of Africans will live in cities by 2030. With this urbanisation, the research group found that threats facing African societies, such as droughts, pandemics and tectonic events, may start to subside. Market instability instead looks set to become the major cause of concern for urban populations, with Johannesburg at risk of losing 35% of annual GDP output in the event of a serious crash.

Mathematicians will see that the dataset for the statistical analysis has been split into an ‘urban’ and ‘rural’ population. With clear difficulties in deciding who counts as being part which, it may be useful to think about the wider applicability of uncertainty in such analysis, and possible solutions which are strictly mathematical. PPE applicants should also think about the purely economic slant on the study, with GDP the only metric used.