Debt Dictionary

Bull Market

Investment Dictionary -> Bull Market

The term bull market refers to a financial market with upward movement of prices. Alternatively, the definition covers markets at which the prices are expected to grow. The term is most widely used with regard to the stock market. However, it can cover any tradable item such as bonds and commodities, among others. A major characteristic of the bull markets is optimism. Investors believe that the markets will continue to perform in a similar fashion. However, it is difficult to predict whether the prices at the bull market will grow consistently. Speculative trading and some psychological effects such as cognitive or emotional bias can exert a negative impact on the growing market. In general, expectations will play an important role with regard to the financial markets. The perception of some economic developments as positive or negative may cause fluctuations.

Bull markets usually appear when the economy recovers and starts to perform better. Investors start buying with the expectation of capital gains. One of the most widely known examples of a bull market was the New York Stock Exchange up to the Great Crash of 1929. The investors believed that the market was capable of sustaining the high prices. However, the Black Thursday witnessed the collapse of share prices.

Investors are typically acting in a group fashion and without a predetermined direction. This form of behavior is denoted by the term “herd behavior”. The expression “bull market”, on the other hand, refers to the way in which animals attack their rivals. A bull that thrusts his horn up metaphorically describes the upward movement of prices. In general, it is believed that the markets go through regular market cycles. The opposite of the bull market, the bear market, refers to a considerable drop in market prices over a longer time period. Bear markets are also accompanied with high expectations on the part of the investors. They appear when the state of the economy starts to decline.


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