“EXPLORING THE BASICS” With Mr. Sharath Sury – part 2 of 10
Posted 5/25/2010 by Chinnu S. on Everything-Finance.net
The following contains excerpts from an interview with Mr. Sharath M. Sury on 05/11/2010. Part two of a ten part series begins below.
So, what exactly is a Bear Market? Before I could even ask, Professor Sharath Sury raised an eyebrow and said, "So, you're probably wondering what a Bear Market is, in comparison." I chuckled, but was amazed with his ability to relate to students, as i nodded affirmatively.
Professor Sury continued, "A 'bear' market can be defined as a market in which a particular asset class is experiencing a secular or long term decline either in absolute or relative terms. Thus, if the Russell 2000 is exhibiting steady, declining returns—usually for at least 20% or more, we might surmise that the US small cap equities market (as represented by the Russell 2000) is in a 'bear market' phase."
Eager to learn if some of the theories floating amongst the students were true, I asked Prof Sury, "is it true that a 'Bear Market' is nothing more than a market correction?"
"Good question," Sharath Sury replied, "..[however, Bear Markets' are] to be disinguished from a "correction," which is a drop of approximately 10% from a recent peak to current trough." Sury continued, "A correction may be self-limiting before a return to a bull market or may lead to continued declines, culminating in a bear market."
Natural curiosity begged the question, "When do Bear Markets typically occur in relation to major economic events?" Sharath Sury explained that they "usually occur after the burst of a 'bubble' (e.g., housing, dot-coms, etc.), a major macroeconomic shock (e.g., credit crisis, commodity price shocks, geopolitical instability), or sustained decline in aggregate (GDP) and profits growth.
(...to be continued; Check back soon for part 3!)
SOURCE blog.everything-finance.net/2010/05/14/the-basics-with-mr-sharath-sury—part-1-of-10.aspx
