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A bear raid is a type of
The practice of bear raid has its roots in the 17th-century Dutch Republic. In 1609, Isaac Le Maire, a sizeable shareholder of the Dutch East India Company (VOC), organized a bear raid on the stock of the company.
stock market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...
strategy, where a trader
Trader may refer to:
* Merchant, retailer or one who attempts to generally buy wholesale and sell later at a profit
* The owner of a trading post, where manufactured goods were exchanged with native peoples for furs and hides.
* Trader (finance), ...
(or group of traders) attempts to force down the price of a stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
to cover a short position. The name is derived from the common use of
''bear'' or ''bearish'' in the language of market sentiment to reflect the idea that investors expect downward price movement.
A bear raid can be done by spreading negative rumor
A rumor (American English), or rumour (British English; see spelling differences; derived from Latin:rumorem - noise), is "a tall tale of explanations of events circulating from person to person and pertaining to an object, event, or issue in p ...
s about the target firm, which puts downward pressure on the share price. This is typically considered a form of securities fraud. Alternatively, traders could take on large short positions themselves, manipulating the price with the large volume of selling, making the strategy self-perpetuating.
History
The practice of bear raid has its roots in the 17th-century Dutch Republic. In 1609, Isaac Le Maire, a sizeable shareholder of the Dutch East India Company (VOC), organized a bear raid on the stock of the company.
See also
* Uptick rule * Market manipulationReferences
Stock market Finance fraud Dutch inventions {{finance-stub