International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

Role of Speculation-A False Confidence in the Commodity Market

Author Affiliations

  • 1Baddi University of Emerging Sciences and Technology, Baddi, Solan, Haryana, INDIA

Res. J. Management Sci., Volume 1, Issue (2), Pages 24-28, September,6 (2012)

Abstract

The term speculation is known as the practice of buying at low prices with the intention of selling later at a higher price. Speculation periodically becomes the subject of intense debate. One claim that speculation, especially in the form of short selling, leads to higher market volatility. Another claim is that speculation leads to unjustified drops in price, in late 2008, the Securities and Exchange Commission imposed a temporary ban on short selling of the stocks of certain financial institutions. But the problem is not always short-selling. It is commonly stated that speculative buying by index funds in commodity futures and over–the–counter derivatives markets created a ‘‘Fizz’’ in commodity prices, with the result that prices, and crude oil prices, in particular, far exceeded fundamental values at the peak. Speculators sometimes are accused of causing unjustified rises in prices. Speculation has always been criticized in the popular language and political discourse, such as to make easy money at the gaming and gambling, also has been made responsible, especially when linked to hoarding, to produce higher prices and thereby harm consumers. This paper is an effort made to draw the attention on the urgency need of speculation and its role in trading system especially in oil, gas and food prices. In this paper, it is concluded that speculation has tremendous impact on the economic growth and the economic system. The researcher focuses on the need to initiate actions to control gambling so that the currency rate can be in bar.

References

  1. Engemann Kristie M. and Owyang Michael T., "Unconventional Oil Production: Stuck in a Rock and a Hard Place," The Federal Reserve Bank of St. Louis' the Regional Economist, 18(3), 14-15 (2010)
  2. Irwin Scott H. and Sanders Dwight R., "The Impact of Index and Swap Funds in Commodity Markets," A technical report prepared for the Organization for Economic Co-operation and Development, (2010)
  3. Campello, Murillo; Graham, John R and Harvey, Campbell R, The Real Effects of Financial Constraints: Evidence from a Financial Crisis, Journal of Financial Economics97(3), 470-87 (2010)
  4. Soros The New Paradigm for Financial Markets: The Credit Crisis of 2008 and what it means ISBN 1-58648-683-7 (2008)
  5. Hirshleifer David, Psychological Bias as a Driver of Financial Regulation, European Financial Management,14(5), 856-874 (2008)
  6. Ashcraft Adam B. and Schuermann Til., “Understanding the Securitization of Sub prime Mortgage Credit,”Foundations and Trends in Finance 2(3), 300-309 (2006)
  7. Caginalp, Gunduz; Porter, David; and Smith, Vernon. Financial Bubbles: Excess Cash, Momentum, and Incomplete Information, The Journal of Psychology and Financial Markets2(2), 80-99 (2001)
  8. Daniel Kent, Hirshleifer David and Subrahmanyam, Avanidhar, Investor Psychology and Security Market Under- and Overreactions, 3(6), 1839-85 (1998)
  9. Chan, Louis K.C., Jegadeesh, Naarasimhan and Lakonishok, Josef, Momentum Strategies, The Journal of Finance51(5), 1681-1713 (1996)
  10. Detemple Jerome & Murthy Shashidhar, "Intertemporal Asset Pricing with Heterogeneous Beliefs," Journal of Economic Theory, Elsevier,62(2), 294-320 (1994)
  11. Irole Jean, "On the Possibility of Speculation under Rational Expectations," Econometrica, Econometric Society, 50(5), 1163-1181 (1982)
  12. Ubinstein Mark, "Securities Market Efficiency in an Arrow-Debreu Economy," American Economic Review, American Economic Association,65(5), 812-24 (1975)
  13. Bruns Jr. William., “Accounting Information and Decision-Making: Some Behavioral Hypotheses,” The Accounting Review 43(3), 469-480 (1968)
  14. Ball Ray and Brown, Phillip. “An Empirical Evaluation of Accounting Income Numbers,” Journal of Accounting Research 6(2), 159-178 (1968)