A non-scientific market theory that bad news comes in large bunches, rather than a little at a time. In other words, the cockroach theory states that if one company in a sector or industry is revealed to have problems, it is likely that other companies in the same sector or industry have problems as well. For example, when it was revealed that Enron's accounting had been deliberately falsified, it was soon known that other companies, notably WorldCom, also had massive accounting problems. See also: Enron scandal.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved