Definition
The term catalyst refers to a disclosure that significantly impacts the value of a security. Catalysts can positively or negatively affect a security's value.
Explanation
Also referred to as a catalyst event, a catalyst is information that can cause investors to swiftly change their valuation of a security. Oftentimes used when describing events impacting the value of equities, the term is also used when describing different types of information, including:
A significantly different product offering.
Comments made by one of the officers of the company, such as the CEO.
An announcement that a company is restructuring its operations, or an officer is leaving the company.
The introduction of new legislation, or the disclosure of lawsuits, that could affect the company's earnings.
An earnings report, or revelation, indicating the company's profitability will increase or decrease significantly going forward.
While certain announcements may change the fundamentals of the company's stock, such as an earnings report, a catalyst may also affect investor sentiment, such as a change in leadership. In either case, the value placed on the stock by investors will shift significantly.
Related Terms
The term market crash is used to describe a sudden decline in stock prices across a significant number of business sectors, resulting in a dramatic loss of investor wealth. Market crashes are oftentimes preceded by a stock market bubble.
Moneyzine EditorNovember 6th, 2024
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The term black swan event refers to an incident of immense impact, which was not anticipated, and has a random probability of occurring. Only recognized in hindsight, individuals assume the risk of a black swan event when they invest in financial markets.Moneyzine EditorNovember 6th, 2024
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The term gray swan event refers to an incident of sizable impact, which can be anticipated, but has a relatively low probability of occurring. Often recognized in hindsight, individuals assume the risk of a gray swan event when they invest in financial markets.Moneyzine EditorNovember 6th, 2024
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