What constitutes a bear market?

A bear market is characterized by a significant decline in asset prices, typically defined as a decrease of at least 20% from recent highs. This condition often reflects widespread pessimism and negative investor sentiment regarding the economy or specific sectors, leading to further selling pressure.

When considering the correct answer, it's essential to understand that "falling or expected to fall" encapsulates the essence of a bear market: a consistent downward trend in prices and an anticipation of continued declines. This creates a cycle where investor confidence diminishes, further impacting prices negatively.

While other market conditions are indeed important, they do not accurately define a bear market. For example, rising prices indicate a bull market, and stable prices suggest a range-bound or neutral market. High volatility can occur in various market conditions, including both bull and bear markets, but it does not specifically determine the direction of price movement. Thus, the definition of a bear market focuses strictly on the trend of price declines.