Search results for: speculation-and-financial-markets

Speculation and Price Indeterminancy in Financial Markets

Author : Shinichi Hirota
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We explore how speculative trading causes price indeterminacy in financial markets. Contrary to standard finance theory, we argue that speculating investors' difficulty in forming rational expectations induces security prices to deviate from the fundamental values. We conducted a laboratory asset market experiment with overlapping generations of investors. We find that in markets with speculating investors (i) price deviations are larger; (ii) price deviations increase as the holding period of investors shrinks (and frequency of security transfers increases); (iii) speculative trading creates upward (downward) pressure on prices when liquidity is high (low); and (iv) price expectations are formed through forward induction from recent price changes, instead of backward induction from the fundamentals. The results suggest that speculation causes price indeterminacy when dynamic formation of inter-temporal rational expectations is infeasible.

Speculation Money Making in Stock Market

Author : Raj Chawla
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In financial markets, “Speculation is trading in shares or commodities or in any financial instrument involving high risk in expectation of substantial gains”.This is an act of trading in financial instruments or act of entering into any financial transaction that has a significant risk of losing most of or all of the initial investment in expectation of significant gains. Decision making based on anticipation of what the future can be, is speculating. What motivates speculating is the possibility to make huge gains out of the transaction by putting some money on risk. One looks for and expects big rewards as proportionate to the risk taken.

Stock Markets Speculative Bubbles and Economic Growth

Author : Mathias Binswanger
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Examining the role of speculative bubbles in the stock market, this text argues that, provided they are sustainable, bubbles may have a positive effect on the market. They may provide additional investment opportunities with the potential to increase aggregate profits and improve economic welfare.

Speculation and Financial Markets

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Financial Speculation

Author : Gerald Ashley
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When we deal in the financial markets are we investing, speculating or gambling? Does it really matter what we call it? As this book shows, the world of finance is not an easily defined game. Simple labels, such as gambling and speculation, won't help us grasp the underlying forces that drive the markets. It's far more important to understand the behaviour and biases of the players - their actions and motivations are the vital components that drive everything; bubbles, crashes, huge fortunes, reckless borrowing and complex instruments and strategies, all flow from this simple fact. And the markets are not just an external object, to be studied dispassionately under a microscope. How we act within our inner self, and apply our own set of risk and reward values to the seeming chaos of the market, is absolutely crucial. Clearly whatever games that are going on in the market are also going on inside our heads. In this fully updated and revised edition, Gerald Ashley gets to the heart of the financial markets. He draws on a wealth of revealing and instructive market insights, stories and anecdotes, challenges all the tired cliches about speculation, and slaughters many of the outdated sacred cows of finance. The book ranges across all the major asset classes, looks at past masters of the art, examines modern thinking on finance and risk, and assesses the value of experts, economists, chartists, market gurus and analysts. Simple examples are used to explain how the basic tools of finance fit together and how to profit in this often complex and unforgiving landscape.

The ABC of Stock Speculation

Author : S. A. Nelson
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?Speculation is a venture based on calculation.?First published in 1903, The ABC of Stock Speculation is a landmark achievement for the profession of stock speculation. This book not only established our modern view of the fundamentals of speculation, it did so through the precise and insightful writings of Charles H. Dow, coined in this book as Dow?s Theory. Nelson, friend and admirer of Dow (first editor of the Wall Street Journal and co-founder of the Dow Jones Industrial Average), sensed that Dow had developed a philosophy, some say subconsciously, which speculators and businessmen could adapt as a reliable guide for conducting their financial operations. After failing to persuade Dow to write his own book, Nelson spent long hours researching the Wall Street Journal for the most exceptional Dow editorials, 15 of which he included in this book. It has been over 100 years?yet even in today?s tech-heavy, volatile markets, the basic components of Dow Theory, technical analysis, price action, and market philosophy, still hold true. Nelson says it best, ?Men rather than markets differ.?The Marketplace Books Classics SeriesWith titles ranging from the hallmark Think and Grow Rich by Napoleon Hill to The ABC of Stock Speculation by S. A. Nelson, our original and unabridged series hopes to illuminate the steadfast values and advice for investment and trading that have not changed in over seventy years. It is our hope that careful and open-minded examination of these books will show that financial wisdom is something that transcends time. We have made the conscious choice to publish these classic works in their full and original state in an accessible paperback format. We encourage you to read slowly, bookmark pages, make notes, and immerse yourself in these books? original essences. We think you will be amazed at how little the core advice for trading the markets has changed and how valuable this advice will be for your investing life today.

Speculation and Price Indeterminacy in Financial Markets

Author : Shinichi Hirota
File Size : 72.22 MB
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To explore how speculative trading influences prices in financial markets we conduct a laboratory market experiment with speculating investors (who do not collect dividends and trade only for capital gains) as well as dividend-collecting investors. We find that in markets with only speculating investors (i) price deviations from fundamentals are larger; (ii) prices are more volatile; (iii) the “mispricing” is likely to be strategic and not irrational; (iv) mispricing increases with the number of transfers until maturity; and (v) speculative trading pushes prices upward (downward) when liquidity is high (low).

Intervention to Save Hong Kong

Author : Charles Albert Eric Goodhart
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By August 1998, the Hong Kong economy had become threatened not only by the natural consequences of the Asian crisis (1997-98), but also by waves of speculation, betting that the authorities would be forced to abandon the linked exchange rate (to the US dollar). When facing previous speculative attacks (starting October 1997), the authorities had followed traditional policies of raising interest rates. But by August 1998, such policies had helped to batter asset markets; property prices and output were falling, and confidence was low. Moreover, the speculators had developed an ingenious 'double play', simultaneously selling both the foreign exchange market and the Hang Seng equity market short; whether the authorities used an interest rate defense, or abandoned the 'link', the speculators would gain either way. So, the authorities decided on a bold, unexpected and unconventional response to reports of a further attack. They would undertake counter-intervention, again both in the equity and foreign exchange markets. This book provides a fascinating story in itself, and insights into what lessons academics and practitioners can learn from the turbulent events of the time.

The Art of Speculation

Author : Philip L. Carret
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"The Art of Speculation is laden with insights and studies that are as fresh today as newly cut grass . . . a joy to read. The topics covered were timeless in 1931 . . . and written in 24-carat prose." -from the Foreword by Victor Niederhoffer A classic in every sense of the word, The Art of Speculation has been heralded by investors, both past and present, as a true standout in the field. Written by Philip Carret -a Wall Street legend long considered a leading thinker in basic value investing -this timeless work is as vital a part of finance literature today as it was when it first appeared almost seventy years ago. Acclaim for The Art of Speculation "Philip Carret has been practicing the art of investing longer than anyone. In the current frothy stock market environment it is helpful to read his insights into the Great Crash of 1929 to see if there are useful parallels. Beginning investors will find The Art of Speculation instructive and students of the market will learn much about what investing was like seven decades ago before computers, derivatives, junk bonds, discount brokers, and hedge funds. His Twelve Commandments for Speculators is good advice for us all." -Byron R. Wien, Managing Director/U.S. Investment Strategist Morgan Stanley & Co., Inc. "A genuine rarity: the intricacies of investing illuminated by clear writing and timeless insight. The chapters on how to read a balance sheet and income statement are classics. No investor should even consider dabbling in the frantic IPO market of today without having read them first." -Christopher M. Byron Esquire

The Psychology of Speculation

Author : Henry Howard Harper
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W]hen once caught in the maelstrom of stock speculation the average man becomes more or less mesmerized, and at critical moments his conservatism, his resolutions and his theories all take flight. Under the discomposing influence of a rapid succession of changing values and alternating impulses he loses his perspective, is incapable of calm reasoning, and is likely to do precisely the opposite of what he had intended to do. -from The Psychology of Speculation How do you keep your head when large sums of money are at stake? What are the greatest psychology stumbling blocks to successful trading? How can we beat the market by learning more about ourselves? This sensible little guide teaches us how to be aware of our own assumptions and prejudices while trading so that we will expect them when they begin to interfere with our reasoning, and so that we can counter them before we do ourselves a financial injury. Originally published in a private edition, Harper's Wall Street wisdom is again available to show us how to be enlightened speculators.