There are two competing hypotheses to explain the crash in ‘87; one claims that exogenous triggers (such as news events) caused the crash, while the other focuses on endogenous factors such as computerized trading. The question of what caused the crash is still unresolved.

Robert Shiller and Richard Roll (two prominent finance academics) each found compelling evidence against the hypotheses. Shiller surveyed 889 investors immediately following the crash and found that only three reported a belief that news regarding proposed tax changes was a trigger for the crash. Roll, on the other hand, found that the presence of computerized trading in a market decreased the severity of the crash.

Shiller, Robert J. (1988). "Portfolio insurance and other investor fashions as factors in the 1987 stock market crash". NBER Macroeconomics Annual. 3: 287–297.

Roll, Richard (1988). "The international crash of October 1987". Financial Analysts Journal. 44 (5): 19–35.

The question of why New Zealand faced prolonged downturns in both financial markets and the real economy is more straightforward. In sharp contrast with the other affected nations, New Zealand didn't loosen monetary policy in response to the crash. The lack of additional market liquidity allowed the crash to continue and worsen. Whereas the impact to the real economies of other nations were small and short-lived, the market downturn in New Zealand spread into the real economy and plunged the nation into a prolonged recession. This recession was compounded by the fact that NZ had generally higher pre-cash leverage ratios than other western nations, which made the decline worse. Moreover, the crash gave a long-lasting blow to investor confidence, which lead to a longer recession and a significantly slower recovery.

Grant, David Malcolm (1997). Bulls, Bears and Elephants: A History of the New Zealand Stock Exchange. Victoria University Press. ISBN 0-86473-308-9.