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Speculation & Financial Risk-Taking: Speculative Market Practices

The purpose of this guide is to help students and other scholars locate relevant academic sources related to speculation and financial risk-taking.

Books, E-Books & Other Resources -- Speculative Markets

Speculative Market Practices

"While the investor seeks to protect his principal as it yields a moderate return, the speculator sacrifices the safety of his principal in hopes of receiving a large, rapid return." [SOURCE]

Terminology Related to Speculative Market Practices

  • Boiler Room - place where high-pressure salespeople use banks of telephones to call lists of potential investors (known in the trade as sucker lists) in order to peddle speculative, even fraudulent, securities.
  • Bucket shop -- illegal brokerage firm, of a kind now almost extinct, which accepts customer orders but does not execute them right away as Securities and Exchange Commission regulations require.
  • Day Trading - the practice of buying stocks or other securities and reselling them within a day (or less) to profit from short-term fluctuations.
  • Financial Risk - investors’ chance of loss the possibility of financial loss in an investment or speculation.
  • High frequency trading (HFT) – the use of extremely high speed computers and automated trading algorithms to trade high volumes of stock at lightning speed.
  • Irrational Exuberance - characterization of market mood in a 1996 speech by then Federal Reserve Chairman Alan Greenspan.
  • Penny Stock - very low-priced stock very low-priced stock, typically under one dollar, that is a speculative investment.
  • Pump-and-Dump - illegal exaggeration of value of stock for profit an illegal practice in which the owner of a stock makes false claims about the stock, exaggerating its value, then sells it at a profit (slang).
  • Real Estate Speculation - During booms in real estate, prices rise quickly, sometimes far above their true value. As in stock investment manias or “bubbles,” a spreading belief that prices will rise indefinitely attracts casual investors who help inflate prices still further.
  • Risk/Reward Tradeoff - An investment principle that says an investment must deliver a higher potential return as compensation for increased risk.
  • Speculator - somebody taking risks to make quick profit somebody who buys goods, stock, or foreign currency with a higher-than-average risk in the hope that it will rise quickly in value.

Speculative Market Practices

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