When investors expect a market to decline, what strategy might they employ?

• A. Going long
• B. Going public
• C. Going short
• D. Attracting capital

Answer: (C)

When investors anticipate a market decline, they may employ a strategy known as "going short." This involves selling securities that they do not own, with the intention of buying them back at a lower price in the future. Essentially, they borrow shares and sell them on the market, hoping the price will drop. If it does, they can repurchase the shares at this decreased price, return the borrowed shares, and pocket the difference as profit.

This strategy leverages the expected decline in the market by profiting from falling share prices, which is the fundamental principle of short selling. It is a common tactic among traders who are bearish on a stock or the market as a whole. Investors use this strategy to hedge against potential losses in their long positions or to speculate on the negative performance of particular stocks or the overall market.

The other strategies do not align with a bearish outlook. Going long refers to buying securities with the expectation that their prices will rise, going public pertains to a company offering shares to the public for the first time, and attracting capital generally relates to raising funds or investments without addressing market downturn strategies.