UPSC Prelims 2010 Q29: Indian Economy – Financial Markets & Capital Markets
In the parlance of financial investments, the term ‘bear’ denotes
- (a) An investor who feels that the price of a particular security is going to fall
- (b) An investor who expects the price of particular shares to rise
- (c) A shareholder or a bondholder who has an interest in a company, financial or otherwise
- (d) Any lender whether by making a loan or buying a bond
Answer: (a) An investor who feels that the price of a particular security is going to fall
Explanation
What "bear" means in financial investment parlance
In stock market terminology, "bear" and "bull" describe opposite market outlooks.
| Option | Verdict | Reason |
|---|---|---|
| (a) Investor expecting a security's price to fall | Correct | A 'bear' is an investor who is pessimistic, expecting prices to decline, and may act on that view (e.g., short-selling) |
| (b) Investor expecting share prices to rise | Incorrect | This describes a 'bull', the opposite market sentiment |
| (c) A shareholder/bondholder with a financial interest | Incorrect | This is a generic description of a stakeholder, not specifically a 'bear' |
| (d) Any lender via loan or bond purchase | Incorrect | This describes a creditor/lender generally, unrelated to bear/bull sentiment |
Bear vs Bull market terms:
| Term | Outlook |
|---|---|
| Bear | Pessimistic, expects prices to fall |
| Bull | Optimistic, expects prices to rise |
Answer: (a) An investor who feels that the price of a particular security is going to fall.
Why each option is right or wrong
- (a) CORRECT. A 'bear' investor expects prices to fall, the opposite of a bullish outlook.
- (b) Incorrect. This describes a 'bull' investor, expecting prices to rise.
- (c) Incorrect. This is a generic stakeholder description, not the specific 'bear' sentiment term.
- (d) Incorrect. This describes a lender/creditor generally, unrelated to market sentiment terms.
Key point
'Bear' = an investor who expects security prices to FALL (pessimistic outlook) — the opposite of a 'bull', who expects prices to rise.
Remember
'Bear' in finance: an investor who expects a security's price to fall.
Common mistakes
- Confusing 'bear' (pessimistic, expects fall) with 'bull' (optimistic, expects rise).
- Mistaking the term for a generic stakeholder/lender description.
- Not connecting the term to its common usage in short-selling strategies.
Exam tip
Bear = price will FALL (pessimistic). Bull = price will RISE (optimistic). Simple, frequently tested market jargon.
Sources
- Securities and Exchange Board of India — Investor Education: glossary of securities market terms
- Encyclopaedia Britannica — stock market