Market Correction
A decline of 10% or more in the price of a security or market index from its recent peak.
Definition
A market correction is a decline of 10% or more in the price of a security, asset, or financial market index from its most recent peak. Corrections are a normal part of market cycles and occur on average about once per year in the stock market. They are less severe than bear markets (20%+ decline) and typically last a few weeks to a few months. Corrections can be triggered by economic data, earnings disappointments, geopolitical events, or simply overvaluation. Many investors view corrections as buying opportunities, as historically markets have recovered from corrections relatively quickly.
Related Terms
Bear Market
A market condition where prices decline 20% or more from recent highs.
MarketsBull Market
A market condition where prices are rising or expected to rise, typically 20%+ from recent lows.
TradingVolatility
A statistical measure of the dispersion of returns for a given security or market index.