In what type of market do stock prices decline over an extended period?

A bear market is characterized by prolonged declines in stock prices, typically defined as a decrease of 20% or more from recent highs. This type of market reflects a negative sentiment among investors, often fueled by widespread pessimism about the economy or specific sectors. In a bear market, investor confidence plummets, leading to reduced spending, lower corporate profits, and an overall downturn in economic activity. This environment can result in widespread selling pressure, further exacerbating the decline in stock prices.

In contrast, a bull market is marked by rising stock prices, where investors feel optimistic and expect upward trends to continue. The debt market refers to the market for buying and selling debt securities, such as bonds, rather than equities, while the equity market encompasses a broader category that includes both bull and bear markets concerning stocks. Thus, the defining characteristic of a bear market—extended price declines—is what makes it the correct answer.