Performance Perspectives Blog

In and out of a bear market, or maybe not

by | Oct 9, 2011

In this weekend’s WSJ, Jason Zweig (in “If It Looks Like a Bear …“) begins with a brief retrospective on what appeared to be the market’s recent entry into bear market territory (and quick departure from), but then touches on what is meant by a “bear market.” It seems that “there is no such thing as an ‘official’ bear market, [though] for convenience…The Wall Street Journal and others define it as a 20% decline from a closing high to a closing low on the Dow or the S&P 500.” This is apparently a new definition. He goes on to explain the source of the term, “bear” (“to sell the bear’s skin before one has caught the bear”). This presentation should be of interest to anyone involved in the world of investing.

I found it quite interesting to learn that there is no official bear market definition. Who would have thunk! Surely a term that is bandied about would have a common meaning and interpretation, but this isn’t the case.

And so, the fact that many of the terms we use in performance not having official meanings isn’t unique. But it’s important for us to know this, I believe, just as with Jason’s insights. I won’t restate some of the points I’ve referenced of late in this blog, as my readers are no doubt familiar with them. Being aware of what is defined or agreed to, versus terms that aren’t, is important, so one isn’t mislead or confused.

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