Dead Cat Bounce
| A dead cat bounce is a temporary recovery of an asset price after a prolonged period of decrease. It is often used in reference to stock prices, but can also be applied to other areas, such as the housing market. The term dead cat bounce comes from the idea that even a dead cat will bounce if it falls from a great height. While this may be true, the bounce is only temporary and the cat will eventually come to a rest. In the same way, an asset price may rebound after a period of decline, but will eventually start to fall again. There are a number of reasons why an asset price may rebound after a decline. One reason is that investors may see the decline as an opportunity to buy, in the hope that the price will rebound. This can lead to a short-term increase in demand, which may push the price up. Another reason is that some investors may believe that the decline is temporary and that the asset will soon start to rise again. This could lead them to buy the asset in the hope of making a profit. However, it is important to remember that a dead cat bounce is only temporary. The asset price may rebound in the short term, but it is likely to start falling again. This means that investors who buy during a dead cat bounce may end up losing money. |
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