Monday, June 8, 2015

Term of the Day: Cockroach Theory

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June 8, 2015
Cockroach Theory

A market theory that suggests that when a company reveals bad news to the public, there may be many more related negative events that have yet to be revealed. The term comes from the common belief that seeing one cockroach is usually evidence that there are many more that remain hidden.

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For example, in February 2007, subprime lender New Century Financial Corporation faced liquidity concerns as losses arising...

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