Stockalypse

Definition of 'Stockalypse'


An abrupt and steep decline in the price of a stock or equity index. A stockalpyse can wipe out tens of millions in market capitalization when it slams an individual stock, and billions in market value when its impact is felt across the broad markets. The length of a stockalypse can vary from a few weeks to many months, depending on the factors that have precipitated it. A broad stockalypse can exert a substantial drag on an economy, as the destruction of stock market value causes a negative wealth effect that in turn impacts consumer spending. The term is a combination of “stock” and “apocalypse".

Investopedia explains 'Stockalypse'




In the case of a specific stock, a stockalypse can be triggered by something as mundane as a massive earnings miss, or a sudden adverse development like a negative court ruling in a lawsuit. A stockalypse in the broad markets is caused by far bigger forces that affect risk appetite and investor sentiment. These could range from a collapsing “bubble” in an influential part of the economy and tighter monetary policy, to excessive valuations and spiraling macroeconomic or geopolitical risk.

The biggest stockalypse in recent memory is easily the global credit-crisis that lasted from October 2007 to March 2009, which erased $37 trillion or 60% of worldwide market value in an 18-month period. In particular, the devastation in global financial markets that commenced with the bankruptcy of Lehman Brothers on September 15, 2008 and lasted for more than a month is a prime example of a fiery stockalpyse.

A transient stockalpyse may occasionally be sparked by human error, such as the “Flash Crash” of May 6, 2010 that saw the Dow Jones Industrial Average plunge almost 1,000 points but recover from that loss within minutes.
 



comments powered by Disqus
Hot Definitions
  1. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  2. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  3. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  4. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  5. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  6. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
Trading Center