What does "bear market" signify?

What does "bear market" signify?

• A. A market condition where prices are rising
• B. A market condition where prices are falling or expected to fall
• C. A market condition characterized by investor optimism
• D. A market condition with high volatility

Answer: (B)

A bear market signifies a condition in which the prices of securities are falling or are expected to fall, typically defined as a drop of 20% or more from recent highs. This term is commonly associated with widespread pessimism among investors, leading to a decrease in demand for securities and overall market sentiment. During a bear market, investors may anticipate further declines, which can result in a negative feedback loop as they abandon their investments to minimize losses. Understanding this concept is vital for evaluating market trends and making informed investment decisions, as it helps investors recognize the potential risks involved during downturns in the economy or specific sectors.

A bear market signifies a condition in which the prices of securities are falling or are expected to fall, typically defined as a drop of 20% or more from recent highs. This term is commonly associated with widespread pessimism among investors, leading to a decrease in demand for securities and overall market sentiment. During a bear market, investors may anticipate further declines, which can result in a negative feedback loop as they abandon their investments to minimize losses. Understanding this concept is vital for evaluating market trends and making informed investment decisions, as it helps investors recognize the potential risks involved during downturns in the economy or specific sectors.