Definition of speculate
- speculates whether it will rain all vacation
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She could only speculate about her friend's motives.
He speculated as to whether she would come.
We don't know what happened—we can only speculate.
speculating on the stock market
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'speculate.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
Speculate was adopted into English in the late 16th century from Latin speculatus, the past participle of the verb speculari, which means "to spy out" or "to examine." Speculari, in turn, derives from specula, meaning "lookout post," and ultimately from the Latin verb specere, "to look (at)." Other conspicuous descendants of specere are inspect and suspect. Some less obvious descendants are the words despise, species, specimen, and, as you may have speculated, conspicuous.
A speculator is a person or an entity that trades securities essentially as bets that the price will go up or down, and as such, typically has an above-average risk tolerance.
Although one can argue that all investment is speculation, an acknowledged speculator will buy or sell a security solely to reap a typically short-term profit from the price movement of that security. This motivation differs significantly from those of more traditional investors or hedgers.
For example, consider the purchase of corn futures. A hedger may purchase these securities in order to offset any negative movements in the price of corn and thus stabilize his or her portfolio (these people might be corn growers or cereal companies, for instance). A speculator, however, may buy the very same security simply because he or she has reason to believe the position will increase in value. He or she simply bets on which way the market is going to go.
Speculation can sometimes drive securities prices away from their intrinsic value, either becoming overpriced during a buying frenzy or becoming underpriced during a huge sell-off. Although speculators sometimes get a bad rap in the press for this reason, they are a crucial lubricant to the markets, particularly the commodities markets. Although they don't want to physically possess any of the commodities they're trading (that is, they don't really want a truckload of rice delivered to their door), their trading activity brings liquidity to the market, which in turn provides stability and efficiency to those markets.
It is important to note, however, that speculators are generally bigger risk takers than other investors. They are more likely than other investors to use leverage, and as such can suffer huge losses alongside huge gains.
: to think about something and make guesses about it : to form ideas or theories about something usually when there are many things not known about it
: to invest money in ways that could produce a large profit but that also involve a lot of risk
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