Bull (Investor) - Explained
What is a Bull Investor?
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Table of ContentsWhat is a Bull?What are the Characteristics of a Bull Investor?Bulls and Risk MitigationBull TrapsBear and Bull Investor ComparisonAcademics Research on Bull Investments
What is a Bull?
A bull is a term that describes a situation in the market and investors that exhibit certain traits. In the stock market, a bull is an investor who buys a security or stock with the expectation that the stock will increase in price and they will make a profit. Bullish investors are sometimes called speculators, these are traders that purchase certain stock hinging on the expectation that it will increase in price.
What are the Characteristics of a Bull Investor?
Generally, bullish investors have high confidence in the upward movement of stock prices in the market. Such investors take a position with the belief that the market will climb higher and they would make significant returns. Investors exhibit bull tendencies when the market is in a bearish phase, this is due to the fact that after the end of a bearish trend, what follows a bullish pattern. Bull investors are generally optimistic, such investors expect an upward movement of prices of stock in the market.
Bulls and Risk Mitigation
In certain cases, the expectations of a bull investor might not fall true given certain market conditions. For instance, if an investor buys a stock hoping for an upward movement of prices and there is a reverse market condition, losses can be incurred. Bull investors take some measures to limit the risk of losses when they take certain positions in the market. The use of stop-loss orders and puts purchase are common methods that bull investor employs to mitigate risk. In a stop-loss order, an investor is able to set a limit at which the stocks will be sold in the event of a downward movement of price.
Bull traps are a common occurrence in bull markets, investors who purchase stocks in the market with the expectation to make profits form an upward movement in price must pay attention to this. Bull traps occur when an investor takes a long position in a security based on the sudden increase in the price of the security which might only be temporary in the actual sense. For instance, Mike is a bull investor who purchases stock A with the expectation that it will increase in price, suddenly, Stock A begins to increase in price and Mike continues to hold on to the stock thinking that the increase in price will continue for long. After a short while, stock A begins to decline in price, this is a bull trap. It is at this point that Mike must decide whether to sell or continue holding the security whose price might encounter further decline.
Bear and Bull Investor Comparison
The opposite of a bear is a bull, a bear investor makes a purchase in the stock market believing that the price or value of specific security will decline in the nearest future. Bearish investors exhibit traits that are totally different from bullish investors, for instance, such investors are highly pessimistic and expect a general decline in the stock market. Bear and bull are not only applicable in the stock market, but they are also traits that can occur in different sectors and industries such as real estate. Investors can be bearish or bullish for certain reasons best known to them or as a result of market analysis.
Academics Research on Bull Investments
Bulls, bears andmarketsheep, Day, R. H., & Huang, W. (1990). Bulls, bears and market sheep.Journal of Economic Behavior & Organization,14(3), 299-329. A deterministic excess demand model of stock market behavior is presented that generates stochastically fluctuating prices and randomly switching bear and bull markets. The stockmarketboom and crash of 1929 revisited, White, E. N. (1990). The stock market boom and crash of 1929 revisited.Journal of Economic perspectives,4(2), 67-83. This paper will sort through many of the hypotheses offered to explain the 1929 boom and bust. Most of the factors cited by historians played trivial or insignificant roles. The central issue is whether fundamentals or a bubble drove the bull market upwards. An econometric resolution of this question is unlikely, for reasons that Flood and Hodrick explain in their contribution to this symposium. However, the qualitative evidence assembled in this paper favors the view that a bubble was present in the 1929 market. Stock-based pay in neweconomyfirms, Murphy, K. J. (2003). Stock-based pay in new economy firms.Journal of Accounting and Economics,34(1-3), 129-147. Ittner, Lambert, and Larcker (J. Accounting Economics (2003) this issue) present compelling evidence that new economy firms rely more on stock-based compensation than do old economy firms, based on 1998 and 1999 data from a proprietary sample of companies. I complement the ILL results by analyzing data over a longer time period (19922001) and, more importantly, document the effect of the 2000 market crash on stock-based pay in new economy firms. Finally, I offer evidence supporting the conjecture that differences in pay practices between new and old economy firms reflect accounting considerations, perceived costs, and competitive inertia. A new business model? The capitalmarketand the neweconomy, Feng, H., Froud, J., Johal, S., Haslam, C., & Williams, K. (2001). A new business model? The capital market and the new economy.Economy and society,30(4), 467-503. This paper uses the concepts of business model and financial ecosystem to analyse the relation between the US capital market and corporate business. Under a capital market double standard, from 1995 to 2000, new companies with digital prospects could recover their costs from the capital market; but, after the tech stock crash in 2000, all companies were required to generate profits from the product market. This encourages a blurring of old and new firm identities, because sectoral power is increasingly necessary to secure cost recovery. But this does not imply any return to business as usual when the financial ecosystem for new technology survives the crash and large-scale venture capital investment continues. From this point of view,the new economy illustrated, concretely, the determining role of finance in the broader processes of financialization. Margin purchases, brokers' loans and thebull marketof the twenties, Smiley, G., & Keehn, R. H. (1988). Margin purchases, brokers' loans and the bull market of the twenties.Business and Economic History, 129-142.The decline of inflation and thebull marketof 19821999, Ritter, J. R., & Warr, R. S. (2002). The decline of inflation and the bull market of 19821999.Journal of financial and quantitative analysis,37(1), 29-61. If stocks were severely undervalued in the late 1970s and early 1980s, then the bull market starting in 1982 was partly just a correction to more normal valuation levels. This paper tests the hypothesis that investors suffer from inflation illusion, resulting in the undervaluation of equities in the presence of inflation, with levered firms being undervalued the most. Using firm level data and a residual income/EVA model, we find evidence that errors in the valuation of levered firms during inflationary times result in depressed stock prices. Our misvaluation measure can be used with expected inflation to make statistically reliable predictions for real returns on the Dow during the subsequent year. Our model suggests that stocks were overvalued at the end of the 1990s. Stock price movement associated with temporary trading suspensions: bear market versusbull market, Hopewell, M. H., & Schwartz, A. L. (1976). Stock price movement associated with temporary trading suspensions: bear market versus bull market.Journal of Financial and Quantitative Analysis,11(4), 577-590. A temporary trading suspension in a listed security represents a temporal discontinuity in a continuous auction market. Although the SEC occasionally suspends trading in specific securities, the NYSE itself administratively halts trading in individual NYSE issues. The latter occur quite frequently (almost three per day on average), and typically last about two hours. NYSE-initiated suspensions are the focus of the present paper.Delete