What characterizes a bear market?

A bear market is characterized by a general decline in stock prices, typically defined as a drop of 20% or more in a broad market index over a sustained period. This decline reflects widespread pessimism and negative investor sentiment, which often lead to decreased investment and trading activity. In such conditions, investors may anticipate further decline and consequently may decide to sell off their holdings to minimize losses, which perpetuates the downward trend.

In contrast, the other options describe scenarios associated with market stability or growth rather than decline. For example, stable or growing stock prices indicate a healthy market condition, while high trading volumes paired with increased investor confidence suggest bullish market activity. A situation where all stocks rise in value depicts a strong market trend. These scenarios do not align with the characteristics of a bear market, emphasizing the importance of understanding the indicators that define different market conditions.