Is speculation stabilizing or destabilizing?
Abstract: The possibility that speculative trading destabilizes or creates a volatile market is frequently debated. Our findings provide evidence that speculative trading in futures markets is not destabilizing. In particular, speculative trading activity reduces volatility levels.
Which term is known as speculation?
In the world of finance, speculation, or speculative trading, refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value. punineep and 3 more users found this answer helpful.
How does speculation affect the economy?
There is an economic benefit, a larger social good that speculation brings in. Stock prices, exchange rates, oil prices, commodity prices or interest rates are economic values that impact a large number of people. The risk to economic activity from unknown future prices is largely mitigated by speculative activity.
What speculator means?
Speculators are sophisticated investors or traders who purchase assets for short periods of time and employ strategies in order to profit from changes in its price. Speculators are important to markets because they bring liquidity and assume market risk.
What is Stabilising speculation?
Stabilising speculation occurs when changes in prices are modified by the role of speculators and the magnitude of price change is limited. For example, if prices fall, then firms will respond to this price fall, by cutting back on supply (the firm does not want to sell at low prices and hopes that prices will rise.)
What is economic speculation?
Speculation refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain. Without the prospect of substantial gains, there would be little motivation to engage in speculation.
What is meant by blue chip share?
A blue-chip stock is a huge company with an excellent reputation. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name.
What is currency speculation with example?
Some currency speculation is necessary to facilitate international trade. Take, for example, a car manufacturer in Germany which exports cars to the United States. As the U.S. importer of German cars is paying her bill in U.S. dollars, the German exporter receives U.S. currency.
How does an increase in the relative price of a country’s goods in terms of foreign goods or real exchange rate affect its balance of trade?
How does an increase in a country’s exchange rate affect its balance of trade? An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade.
What is an example of speculation in a sentence?
Examples of speculation in a Sentence He dismissed their theories as mere speculation. The book is just a lot of idle speculation about the future. Her speculations leave many questions unanswered. He lost everything in foolish land speculation.