speculation

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Speculation

Purchasing risky investments that present the possibility of large profits, but also pose a higher-than-average possibility of loss. A profitable strategy over the long term if undertaken by professionals who hedge their portfolios to control the amount of risk.

Speculation

An investment with an exceptionally high risk. Speculators may invest in a start-up company or in a volatile commodity. These risks carry the possibility of very high returns. Speculators often trade actively and many have hedging strategies to reduce their risks. See also: Hedge fund.

speculation

The taking of above-average risks to achieve above-average returns, generally during a relatively short period of time. Speculation involves buying something on the basis of its potential selling price rather than on the basis of its actual value.

speculation

the buying and selling of COMMODITIES (tea, tin etc.), FINANCIAL SECURITIES (shares etc.) and FOREIGN CURRENCIES whose market prices are characterized by substantial fluctuations over time, by individuals and firms (speculators) in the hope of making windfall profits. For example, in the STOCK MARKET and FOREIGN EXCHANGE MARKET, a speculator may take a ‘bullish’ view that a share price or the exchange rate of a currency will rise and may gamble on this possibility by buying that share or currency, using either his or her own money or short-term credits, and hoping to resell it at a higher price after a few days or weeks, in order to make a capital gain on the difference between the two prices. On the other hand, the speculator may take a ‘bearish’ view that a share price or currency value will fall and may gamble on this possibility by selling the share or currency (even though he or she does not currently own any), using the proceeds from this sale to buy at a lower price the shares or currency he or she has promised to deliver a week or two later.

Speculative activity may have a destabilizing effect on share prices or exchange rates if speculators take a collective view that prices will rise or fall, accelerating and magnifying upward or downward price movements. Because of the disruptive effects of speculation on international trade, countries' central banks often intervene in the foreign exchange markets to maintain ‘orderly’ exchange rates. See ARBITRAGE, FORWARD MARKET, FLOATING EXCHANGE RATE SYSTEM, STAG, ACCOUNT PERIOD.

speculation

the purchase or sale of ASSETS, real or financial, to achieve a CAPITAL GAIN.

See ARBITRAGE, SPECULATIVE DEMAND FOR MONEY, SPECULATOR.

speculation

Investment decisions based on the hope and expectation there will be a profit, but no firm evidence that this will be the case. As a general rule, the more speculative the venture, the greater the reward should be,commensurate with the risk taken.

References in periodicals archive ?
Shorting the currency is a strategy in currency speculation in which currency traders take out massive loans in a local currency and then start selling to buy dollars causing the exchange rate to plummet.
A local gold trader working in Egypt's black market said that currency speculation, in addition to the expansion of the black market trade in dollars, which has led to the devaluing of the Egyptian pound, has created a black market for gold.
At the Legislative Yuan, Chen pointed out that gains from currency speculation is taxable and should be taxed, saying that the FSC is obligated to assist the MOF in levying such a tax, should the latter decide to do so.
It aimed to slow down currency speculation and reduce the frenzy of buying and selling currencies whatever the true state of national economies.
It seems that the Church has not actually been involved in the worst of the practices that have contributed to the credit crunch, although there is a question mark over whether it has benefited from currency speculation that has damaged sterling.
DUBAI: Bahrain and other Gulf oil producers cut some interest rates yesterday in line with a US move, to ward off currency speculation, while Qatar signalled it could raise its benchmark lending rate.
For example, the literature on globalization has dealt in depth with the way currency speculation and the flow of finance capital has created economic difficulties for a governments around the world.
FRENCH PRIME MINISTER Lionel Jospin, a likely presidential candidate in his country's 2002 elections, has thrown his support behind a plan to tax all currency speculation transfers originating in Europe.
It said it will continue to limit borrowing of Singapore dollars by non-residents for currency speculation and discourage the development of an offshore Singapore dollar market.
Malaysian banks had also been happy to exploit currency speculation when someone else was on the receiving end as in the case when the battering of sterling forced the UK from the European Exchange Mechanism.
But the severity of that adjustment was exacerbated by the "hit and run" tactics of aggressive currency speculation.
Thailand was too strong, too smart, and too successful to fall prey to currency speculation.