What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community.


A correction is a short term decline in stock market share prices or indexes usually of about 10%.

Expanded Definition

In a bull market, overly exuberant investors can bid up the price of stocks faster than earnings rise. That causes the price earnings ratio to increase. When multiples reach excessive levels, buyers may hesitate to continue buying and sellers may decide to take profits. That causes a short term decline is stock prices that usually brings prices back to more typical price earnings ratios.

Related Fool Articles

Related Terms

Recent Mentions on Fool.com