Correction
Definition
A decline of 10-20% in a stock, bond, commodity, or index. Corrections are a normal part of market cycles, occurring roughly once per year on average. They differ from bear markets (20%+ decline) and crashes (sudden, sharp drops).
Related Terms
Bear Market
A market condition where securities prices fall 20% or more from recent highs, typically accompanied by widespread pessimism. The average bear market lasts about 9.6 months, while the average bull market lasts 2.7 years.
Bull Market
A market condition where securities prices are rising or expected to rise, typically defined as a 20%+ increase from recent lows. Bull markets are characterized by optimism, investor confidence, and economic growth.
Volatility
A statistical measure of the dispersion of returns for a given security or market index. High volatility means large price swings; low volatility means stable prices. The VIX index measures expected volatility of the S&P 500.
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