speculation
noun
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Definition of speculation
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Synonyms & Antonyms for speculation
Synonyms
adventure, chance, crapshoot, enterprise, flier (also flyer), flutter [chiefly British], gamble, throw, venture
Antonyms
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Examples of speculation in a Sentence
Recent Examples on the Web
In its wake and ahead of Thursday's meeting, speculation centered on whether the event might move to Louisville and to Churchill Downs, also a nine-time host of the Breeders' Cup. — Chuck Culpepper And Jacob Bogage, courant.com, "Breeders’ Cup will remain at Santa Anita, where 30 horses have died since Christmas," 28 June 2019 The post ignited fan speculation about the reasoning behind this look, and then Sarah Jessica Parker herself finally—finally—cleared the air. — Marina Liao, Marie Claire, "Why Carrie Bradshaw's Shoes Didn't Match In This Iconic 'SATC' Episode," 27 June 2019 All of the ex-Beatles activity resulted in breathless media speculation: Was this all leading to an announcement about an official reunion? — David Gambacorta, Longreads, "Took You By Surprise: John and Paul’s Lost Reunion," 25 June 2019 Rustam Barbee, the attorney for Louis Kealoha, said the government’s conspiracy case is based on suspicion and speculation, and that his client wasn’t involved in his wife’s financial dispute with her uncle. — Washington Post, "Prosecutor says Hawaii police chief, wife abused positions," 25 June 2019 Now, after 18 months of speculation, work, and backlash from local advocates, the company has a 1,524-page master plan for the 12-acre lot, called Quayside. — Aarian Marshall, WIRED, "Alphabet's Plan for Toronto Depends on Huge Amounts of Data," 24 June 2019 There is much speculation over the validity of the engagement, however, since the influencers' relationship did not begin until the end of April. — Ellise Shafer, Billboard, "Jake Paul & Tana Mongeau Say They're Engaged," 24 June 2019 Cipollone quietly came up in early speculation over who might take McGahn’s place. — Jen Kirby, Vox, "Pat Cipollone is Trump’s new White House counsel," 17 Oct. 2018 Other names often mentioned in speculation are French central bank head Francois Villeroy de Galhau, Finnish central bank head Olli Rehn, former Finnish central banker Erkki Liikanen, and Irish central bank head Philip Lane. — David Mchugh, Fox News, "European Central Bank to take next step in tapering stimulus," 13 Sep. 2018These example sentences are selected automatically from various online news sources to reflect current usage of the word 'speculation.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for speculation
speculation
nounFinancial Definition of speculation
How It Works
Technically, anyone who buys or shorts a security with the expectation of a favorable price change is a speculator. For example, if a speculator believes XYZ Company stock is overpriced, they may short the stock, wait for the price to fall, and make a profit. It's possible to speculate on virtually every security, though speculation is especially concentrated in the commodities, futures, and derivatives markets.
But to really understand speculation, one must understand how it differs from hedging. Let's consider an example: let's assume part of your investment portfolio includes shares of Company XYZ, which manufactures autos. Because the auto industry is cyclical, Company XYZ shares will probably decline if the economy starts to deteriorate.
If you want to protect this investment -- that is, you want to hedge your investment -- one way to do that is to buy defensive stocks. You may choose "noncyclicals," or companies that sell basic necessities like toothpaste or toilet paper. During economic slumps, these stocks tend to hold or increase their value, which could offset the loss in value of the XYZ shares.
A speculator wouldn't follow this strategy. If a speculator purchased food-company stocks, he would do so because he simply believes the stock is going to increase.
Speculation can increase short-term volatility (and thus, risk). It can inflate prices and lead to bubbles, as was the case in the 2005-2006 real estate market in the United States. Speculators who were betting that home prices would continue to increase purchased houses (often using leverage) intending to "flip" them for a profit. This increased the demand for housing, which raised prices further, eventually taking them beyond the "true value" of the real estate in many markets. The frenzied selling that ensued is typical for speculative markets.
Why It Matters
Some people may see speculators as dangerous gamblers, but speculators actually provide much-needed liquidity to markets and are thus a vital component of market efficiency. Without them, many commodities markets, for example, would virtually grind to a halt because the only participants would be farmers and food companies. With fewer participants in a market, bid-ask spreads would widen and it would be much harder for buyers and sellers to find each other. The resulting illiquidity would dramatically increase the risk in that market.
Source: Investing Answers
speculation
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English Language Learners Definition of speculation
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Legal Definition of speculation
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