What is the definition of a 'bear market'?

What is the definition of a 'bear market'?

• A. An investment portfolio experiencing high returns
• B. A market condition where prices are falling or expected to fall
• C. A type of market characterized by stable prices
• D. A situation where prices are raised due to high demand

Answer: (B)

A bear market is defined as a market condition where prices are falling or are expected to fall. This typically refers to a decline of 20% or more in a broad stock index over a sustained period, often accompanied by widespread pessimism and negative investor sentiment. A bear market signifies a downturn in the economy or a particular market, indicating a general lack of investor confidence which can lead to further price declines. Understanding the context of this term is crucial in finance and investing, as it helps investors adjust their strategies accordingly. For example, while in a bear market, investors might opt to hold onto cash or invest in safer assets rather than risk further losses in declining markets. The other definitions do not accurately capture the essence of a bear market; they refer to conditions of rising prices or stability rather than the decline that characterizes a bear market.

A bear market is defined as a market condition where prices are falling or are expected to fall. This typically refers to a decline of 20% or more in a broad stock index over a sustained period, often accompanied by widespread pessimism and negative investor sentiment. A bear market signifies a downturn in the economy or a particular market, indicating a general lack of investor confidence which can lead to further price declines.

Understanding the context of this term is crucial in finance and investing, as it helps investors adjust their strategies accordingly. For example, while in a bear market, investors might opt to hold onto cash or invest in safer assets rather than risk further losses in declining markets. The other definitions do not accurately capture the essence of a bear market; they refer to conditions of rising prices or stability rather than the decline that characterizes a bear market.