| |
Speculation is a financial position or strategy that attempts to make money from a zero-sum game that produces little or no actual economic value. In most cases, speculation is little more than a guess at future prices. A speculator needs to have an information advantage over other market participants in order to achieve sustainable gains.
Speculation is widely regarded as having negative effects. When a speculator wins they may enjoy the returns. However, when they lose they often can't repay their debts resulting in costs to banks, governments or investors. In many cases, speculative positions are highly leveraged and result in increased selling pressure in the event of a market crash.|
Type | | Definition (1) | A financial strategy that produces no value. | Definition (2) | Focusing on price movements as opposed to value creation. | Effect | Speculation can have social and economic costs, particularly if financial intermediaries direct money to speculation rather than loans to businesses that produce value. | Related Concepts | |
Economics
This is the complete list of articles we have written about economics.
If you enjoyed this page, please consider bookmarking Simplicable.
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.
|