Speculation
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In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that that asset will become more valuable in a brief amount of time.[1] The term can also refer to short sales, in which the speculator hopes for a decline in value.
Many speculators pay little attention to the fundamental value of a security and instead focus purely on price movements.[2] In principle, speculation can involve any tradable good or financial instrument. Speculators are particularly common in the markets for stocks, bonds, commodity futures, currencies, cryptocurrency, fine art, collectibles, real estate, and financial derivatives.
Speculators play one of the four primary roles in financial markets, along with:
- hedgers, who engage in transactions to offset some other pre-existing risk
- arbitrageurs, who seek to profit from situations where fungible instruments trade at different prices in different market-segments
- investors, who seek profit through long-term ownership of an instrument's underlying attributes
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Compare:
Thomas Temple Hoyne (1922). Speculation: Its Sound Principles and Rules for Its Practice. Chicago: Economic Feature Service. p. 35. Retrieved 12 August 2025.
Much of the confusion that has muddled attempts to define speculation has grown out of the use of the term not only as the name for all transactions of a certain class, but also as the name for the force that brings them about and underlies all economic activity, and for the reasoning that directs that force. The definition which I have developed is a definition of those transactions which are the resultants of the speculative force acting alone, and directed by reasoning.
- ^ Taylor, Mark P.; Allen, Helen (1992-06-01). "The use of technical analysis in the foreign exchange market". Journal of International Money and Finance. 11 (3): 304–314. doi:10.1016/0261-5606(92)90048-3. ISSN 0261-5606.