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Financial Speculation and speculators

April 20, 2012 FINANCE No Comments

imageA financial term you hear much in recent years and almost always with negative connotations is speculation. The graduation of the negativity that goes from being the generator of all the current economic woes to the explanation of those unexpected movements, contrary to logic or without a possible economic explanation to underpin them.

The financial definition of speculation is the set of financial transactions aimed at economic benefit being based on the variability of prices over time. Well explained almost any financial transaction would be speculative, but in reality it is those operations that have no control over the management of assets used in transactions whether tangible, intangible or financial. This is intended to indicate that the investment is made in assets that do not guarantee the return of benefits or even the return of the asset acquired.

A clear example of speculative movement but no one would consider it as such is the acquisition of public debt of state or government (bills, bonds or similar) and that investors only want to receive a future benefit but cannot enter into management between economic. The yields, which in this case are determination by the projected growth, tax cuts or government spending control.

The truth is that contrary to what is thought not all generate speculative profits, but have a very high risk and accept that risk speculators. In situations like the current market where there is a lot of volatility determined by the indicators invertidumbre is thankful that there are investors who take high risks.

The negative connotation of the speculator then come from investors who take advantage of a position, whether economic, power or a large amount of capital to change the price of the securities for a profit. In some cases, their movements would be contrary to the market would do but his performance as decanted in their own benefit. Also consider those speculative movements that may come to have inside information about Cambyses, expansions, acquisitions or mergers between firms and can lead to changes in the prices of the securities or shares of a particular company. The latter case is usually prosecuted under the laws of different countries, but almost always very difficult to prove whether a speculator possession of inside information that gave a significant advantage over other investors.

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