Market Overhang

AAA

DEFINITION of 'Market Overhang'

An observational theory stating that in certain stocks at certain times, there is a buildup of selling pressure. This occurs as a combined result of sales and a strong wish to sell among those who still hold the stock but fear that selling it may cause further declines. Depending on the overall liquidity in the stock, a market overhang can last for weeks, months or longer. Market overhang usually relates to trading in one security but can also apply to larger areas of the market, such as an entire sector.

INVESTOPEDIA EXPLAINS 'Market Overhang'

Market overhang is most often felt and created by institutional investors, who may have a large block of shares they wish to sell and are aware of high selling interest across the market for the stock. Another scenario arises when a large shareholder is thought to be looking at selling his or her stake. This creates an overhang in the stock, which prevents investors from buying the stock until the large shareholder is done selling his stake. Market overhang can also develop in a poorly-performing IPO when the lockup period ends and insiders look to unload their recently-acquired shares.

RELATED TERMS
  1. Bagging the Street

    An investor's failure to avoid trading in the stocks that are ...
  2. Stock

    A type of security that signifies ownership in a corporation ...
  3. Institutional Investor

    A non-bank person or organization that trades securities in large ...
  4. Significant Order

    An order to buy or sell a security that, due to its abnormally ...
  5. Block Trade

    An order or trade submitted for sale or purchase of a large quantity ...
  6. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding ...
RELATED FAQS
  1. Why would my stock's value decline despite good news being released?

    More often than not, when a firm releases an earnings report the market will react to this news by adjusting the firm's stock ... Read Full Answer >>
  2. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  3. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  4. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  5. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>
  6. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Keeping An Eye On The Activities Of Insiders And Institutions

    These transactions reveal much about a stock. We go over what to consider and where to find it.
  2. Active Trading

    Introduction To Level II Quotes

    Find out what's happening in a given stock with this service showing Nasdaq market makers' best bid and ask prices.
  3. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  4. Stock Analysis

    GrubHub (GRUB): Will it Deliver?

    Analysts are all over the map on GrubHub, but its latest quarterly numbers look pretty solid.
  5. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.
  6. Stock Analysis

    Will Jet.com Revolutionize Shopping?

    Jet.com has arrived and will look to steal market share from Amazon over the next several years. Will it be successful?
  7. Stock Analysis

    3 Things You Should Know About PayPal's IPO

    Read about what investors should consider before the PayPal IPO, including the company's strong revenue growth, business growth and competition.
  8. Economics

    What Happens in a Carve-Out?

    A carve-out happens when a corporation isolates part of its business and shares those profits with a third party.
  9. Entrepreneurship

    How to Exit Your Small Business with Grace

    Here is a guide for how best to leave your baby — your small business.
  10. Investing

    Which is the Better Bet: Amazon or eBay?

    Amazon and eBay are solid ecommerce companies, but the former is more innovative and diversified. Plus, a third is about to enter the fray.

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!