Ohio Securities Industry Essentials (SIE) Practice Exam

Question: 1 / 400

What characterizes a "bear market"?

A market condition where prices are stable

A market condition in which prices are falling, encouraging selling

A bear market is characterized by declining asset prices, typically defined as a situation where prices fall by 20% or more from recent highs. This downward trend leads to a negative market sentiment, which often encourages selling as investors anticipate further losses. In this environment, fear and pessimism prevail, causing a lack of confidence in the market's ability to recover in the near term. Investors may move assets out of equities or other affected assets and seek safer investments, such as bonds or cash equivalents, leading to increased selling pressure that perpetuates the bear market. This option distinctly encapsulates the essence of the bear market concept, highlighting the price decline and the resultant investor behavior.

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A market with increased trading volume

A market driven by investor optimism

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