Chasing The Market

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DEFINITION of 'Chasing The Market'

Entering or exiting of a trend after the trend has already been well established. Investors are often unaware of the fact that they are chasing the market, which can dent the value of a portfolio. This type of investing is often seen as irrational as decisions are often based on emotion instead of careful analysis of the value of the investment.

INVESTOPEDIA EXPLAINS 'Chasing The Market'

Chasing the market refers to both the entering into highly priced positions after they have rapidly increased and become overvalued as well as the exiting of positions after they have rapidly decreased and become undervalued. During the internet bubble some investors entered the rapidly appreciating sector well after the trend had been established and lost considerable sums when the bubble bust.

RELATED TERMS
  1. Fire Sale

    Selling goods or assets at heavily discounted prices. Fire sale ...
  2. Overvalued

    A stock with a current price that is not justified by its earnings ...
  3. Undervalued

    A financial security or other type of investment that is selling ...
  4. Trend

    The general direction of a market or of the price of an asset. ...
  5. Irrational Exuberance

    Unsustainable investor enthusiasm that drives asset prices up ...
  6. Bubble

    1. An economic cycle characterized by rapid expansion followed ...
RELATED FAQS
  1. How do investors "chase the market"? It this a bad thing?

    Generally , an investor "chases the market" when he or she enters into a highly priced position after the stock price has ... Read Full Answer >>
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