What is ‘Heavy’
A market that is demonstrating difficulty in advancing and is displaying a tendency to decline. A heavy market may be a manifestation of investor uncertainty about near-term direction, and a sign that the market is topping out. It may also be characterized by a shortage of buyers (many of whom may prefer to stay on the sidelines until the uncertainty abates) and an abundance of sellers. Such a market is sometimes also referred to as a top-heavy market.
Explaining ‘Heavy’
A heavy market could find itself vulnerable to toppling over if economic conditions and/or uncertainty worsen, as this would exacerbate the imbalance between buyers and sellers of stocks or futures. As such, a heavy market could be interpreted as a signal of, or precursor to, a potential steep decline in the near to medium-term.
Further Reading
- A new class of models for heavy tailed distributions in finance and insurance risk – www.sciencedirect.com [PDF]
- Bayesian Heavy-tailed Stochastic Volatility Model in Finance Analysis Based on MCMC Simulation [J] – en.cnki.com.cn [PDF]
- Emerging markets and heavy tails – www.sciencedirect.com [PDF]
- Bootstrap Finance: the art of start-ups. – www.ncbi.nlm.nih.gov [PDF]
- Heavy tails in finance for independent or multifractal price increments – www.sciencedirect.com [PDF]
- Portfolio management with heavy-tailed distributions in Islamic Finance – platform.almanhal.com [PDF]
