What characterizes a bear market?

A bear market is characterized by a decline in the prices of securities, typically defined as a drop of 20% or more from recent highs. This situation often reflects widespread pessimism and negative investor sentiment about the market or economy. In such conditions, investors expect prices to continue falling, leading to reduced buying activity and potentially a self-reinforcing cycle of selling.

Falling prices can stem from various factors, including economic downturns, adverse corporate news, or broader geopolitical events. The expectation of continued price declines influences investor behavior, often resulting in further market contraction.

The other choices do not align with the definition of a bear market. Rising prices indicate a bull market, whereas stability in securities prices suggests a lack of significant upward or downward movement, which typically characterizes a sideways or stable market rather than a bear market. High volatility may be present in various market conditions but does not specifically define a bear market, as volatility can be both high or low during bear markets depending on market reactions to news and sentiment.