Price Creep

AAA

DEFINITION of 'Price Creep'

The gradual and steady increase in the valuation or market price of an asset. Price creep refers to a situation in which either an individual or a group of individuals gradually lessen its reservations about paying higher prices for a given asset.

INVESTOPEDIA EXPLAINS 'Price Creep'

Everyday life provides commonplace examples of price creep in action. Rates charged at movie theaters or for a casual dinner out at a restaurant can be subject to price creep, especially in high-profile urban areas. Over time, customers become accustomed to paying higher prices for the good or service in question; as a result, prices at most business tend to keep rising year after year, in excess of the rate of inflation.

In the financial markets, price creep can be seen where investors gradually give greater valuation to a financial security. For example, at first, an investor may deem a given stock to be worth $10 per share. But after following the company for a while and watching the stock's price trend upward, the investor may eventually relent and decide that $15 per share is a fair price for the stock, even though that person initially deemed $10 to be a fair market value.

RELATED TERMS
  1. Trend

    The general direction of a market or of the price of an asset. ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. Market Psychology

    The overall sentiment or feeling that the market is experiencing ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Technical Rally

    An upward movement in a security's price following a declining ...
  6. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
Related Articles
  1. Fundamental Analysis

    Discounted Cash Flow Analysis

    Find out how analysts determine the fair value of a company with this step-by-step tutorial and learn how to evaluate an investment's attractiveness for yourself.
  2. Active Trading Fundamentals

    How The Power Of The Masses Drives The Market

    Market psychology is an undeniably powerful force. Find out what you can do about it.
  3. Options & Futures

    How To Read The Market's Psychological State

    Discover what on-balance volume, accumulation/distribution and open interest can tell you about the market mood.
  4. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  5. Trading Strategies

    5 Ways To Adapt To Tough Markets

    Tough markets undermine profitability and lower self-confidence. Fight back with five simple but powerful rules of engagement.
  6. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  7. Bonds & Fixed Income

    What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond investments.
  8. Active Trading Fundamentals

    What is the difference between cash flow and fund flow?

    See how cash flow and fund flow differ from each other, and why fund flow can be used very differently by accountants and investors.
  9. Active Trading Fundamentals

    How do central bank decisions affect volatility?

    Using an aggregate, macroeconomic perspective, take a look at how some of the ways central bank decisions can impact market volatility.
  10. Bonds & Fixed Income

    Why are bond yields calculated in terms of basis points?

    Find out why financial analysts and publications track and quote bond yields in basis points, or bps, rather than simply stating percentages.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center