Advance/Decline Theory measures market breadth by analyzing:

• A. The number of shares closing up or down on a specific day.
• B. The total market capitalization of all listed companies.
• C. The average daily trading volume across exchanges.
• D. The number of new highs versus new lows in the market.

Answer: (A)

Advance/Decline Theory evaluates market breadth by looking at how many stocks participated in the move on a given day—specifically, the number of issues that closed higher versus those that closed lower. This shows whether a broad swath of the market is moving with the trend, or if only a few stocks are leading while most others lag. When more stocks close up, breadth is positive and supports a continued move; when more close down, breadth is weak and a reversal or consolidation may be likely. The other options focus on market size (total capitalization), liquidity (average volume), or a different breadth signal (new highs versus new lows), rather than the count of advancing versus declining issues.