Which of the following terms is used to describe a decline in a financial market or stock prices?

Which of the following terms is used to describe a decline in a financial market or stock prices?

• A. Recovery
• B. Bear market
• C. Correction
• D. Rally

Answer: (B)

The term that describes a decline in a financial market or stock prices is "bear market." A bear market is generally identified when there is a prolonged drop of 20% or more in broad stock indices, often reflecting widespread pessimism about the economy or financial prospects. This term captures a significant downturn in market sentiment and investor confidence, leading to a negative outlook for the markets. In contrast, other terms like "recovery" indicate a positive turnaround from a downturn, "correction" refers to a shorter-term decline—typically around 10%—in a bull market, and "rally" signifies a rise in stock prices or a market recovery after a decline. Understanding these distinctions is crucial in analyzing market trends and investor behavior.

The term that describes a decline in a financial market or stock prices is "bear market." A bear market is generally identified when there is a prolonged drop of 20% or more in broad stock indices, often reflecting widespread pessimism about the economy or financial prospects. This term captures a significant downturn in market sentiment and investor confidence, leading to a negative outlook for the markets.

In contrast, other terms like "recovery" indicate a positive turnaround from a downturn, "correction" refers to a shorter-term decline—typically around 10%—in a bull market, and "rally" signifies a rise in stock prices or a market recovery after a decline. Understanding these distinctions is crucial in analyzing market trends and investor behavior.