Market Correction
A correction is a drawdown that is large enough to notice and not yet large enough to be called a bear — folk usage is about −10%.
Definition
Market Correction refers to folk usage is about −10%. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Equity risk premia compress or expand with earnings paths and factor regimes. When folk usage is about −10% shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what market correction is saying. If folk usage is about −10% moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Separate index beta from residual; know the sector and factor loadings of the claim. Prefer a short written null hypothesis for Market Correction: what would falsify the current reading in the next window?