Why is it called a bull or bear market?

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Image: Reuters/Brendan McDermid
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The term “bull market” refers to a stock market that has been rising; a “bear market” is one where prices have been falling. In both cases, the zoological terms tend to kick in when prices rise or fall by 20% or more. When it comes to individual investors, a “bull” expects stocks to rise, while a “bear” acts on the assumption they will fall.

How did all these animals get into finance?

The historical record is pretty clear: The bear came before the bull. Most evidence suggests it originated with a proverb that cautions against the temptation to “sell the bear’s skin before one has caught the bear” (sort of like counting your chickens before they hatch, but with a lot more gore).

By the 18th century, the phrase “bear-skin jobber” had become a pejorative for sellers, especially the disreputable ones who actively bet that prices will fall. “Thus every dissembler, every false friend, every secret cheat, every bear-skin jobber, has a cloven foot,” Daniel Defoe wrote in 1726. The term was popularized during the one of the world’s first huge market crashes, the South Sea Bubble of 1720.

There’s less historical evidence for the rise of the term “bull,” but it seems to have been chosen for its symbolic opposition to the bear.

Some people say the terms refer to the ways the animals attack their prey: Bears swipe downward with their paws while bulls thrust upwards with their horns. Poetic, but there’s no real evidence that the metaphor had anything to do with the terms’ original use in a markets context. An entirely different theory, which discounts the whole bear-skin jobber business, says the terms come from the early London stock exchange, when traders would fill a bulletin board with “bulls” (that is, bulletins) during times of volatile trading, while in slow markets the board would be bare.

Though the terminology’s origins are murky, there is one reason these two animals lived side by side in the popular imagination just as they were gaining prominence as market terms: the barbaric British pastime of watching a team of dogs fight a wild animal. Going back to medieval times, but especially in the 16th and 17th centuries, people thought it was excellent sport to chain a bear in a pit and then unleash dogs on it, until either several dogs were killed or the bear was mauled into submission (not death, though; bears were expensive to import). Dogs were also made to fight rats, badgers, roosters, and cruelly creative configurations like apes tied to ponies. But next to bears, bulls were particularly popular, favored for the moments of drama when they tossed dogs into the air with their horns.