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Bear markets: Why they matter

Perceptions of a bear market can push prices down further, prolonging the pain.

A 16th-CENTURY proverb advises: “It’s unwise to sell a bear’s skin before catching it.”  That’s one of the stories used to explain why, in modern times, stock market investors refer to someone who sells a stock expecting its price to drop as a “bear.”

It follows that a market in which stocks are persistently declining in value is known as a “bear market,” like the one that many markets around the world are experiencing at the moment.  The opposite, when assets are steadily rising over a period of time, is a “bull” market.

In my classes, I teach my students about the efficient market hypothesis, which states

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