Selling panic is a phenomenon that generally takes place in the stock market environment and that consists of the massive flight of investors or holders of securities of a certain company or certain assets through urgent sales and at lower prices than usual.
Often the selling panic grows with the succession of days or sessions in which the value of a stock for example is reduced and there is a forecast that this trend will continue and / or increase soon. At that time, investors decide to indiscriminately dispose of their portfolios of said shares, even taking into account their lower value, but considering that it is a better option to have them with a lower value in a short space of time.
In other words, a pronounced uncertainty is created regarding investment recovery, which causes shareholders to start selling part of their portfolios trying to avoid further losses.
A very common consequence that comes from the appearance of seller panic is the decrease in value of certain shares or securities . In fact, panic is often highly contagious in the markets and strongly helps to make the expectations of the agents involved in them change.
From an economic point of view, it is difficult to theorize and understand this type of phenomenon, since they are closely linked to factors that are difficult to measure empirically, such as the conduct or behavior of people and the effects they cause on the companies in which they operate. .
Causes of the appearance of seller panic
The origin of a selling panic phenomenon in a market is usually related to changing and unstable economic environments, often frequent in the stock market environment . Alternatively, there are many occasions when the emergence of a panic among investors may be due to rumor mill regarding the evolution of these markets and even to the role of inside information .
It is also common that political and economic measures taken by governments and institutions, both national and international, affect the decision-making of company shareholders to the point of creating confusion and panic in the markets. A clear example has recently been experienced in our country with the changes in the banking sector resulting from the drop in value and subsequent sale of Banco Popular and the protectionist decisions made regarding Liberbank.
Selling panic in other markets
Although as indicated, this concept is mainly related to the stock market, it also appears in other markets and sectors where urgent and indiscriminate sales are made in relation to other goods, as happens in the real estate market, for example.