Speculative Flow

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DEFINITION of 'Speculative Flow'

The movement of speculative capital between different assets or areas of the economy. Speculative flow can increase the value of an asset due to increased investor demand.

INVESTOPEDIA EXPLAINS 'Speculative Flow'

For example, assume that investors believe the technology sector will outperform other sectors in the economy over the next year. In this case, many investors may wish to move their speculative capital from other areas of the market into the technology sector. If this occurs, speculative technology stock prices will increase.

Speculative flow is often attributed to above-average levels of volatility and risk, so investors will often have a hedge strategy in place to limit potential losses.

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RELATED FAQS
  1. What is the difference between hedging and speculation?

    Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying ... Read Full Answer >>
  2. How do speculators profit from options?

    As a quick summary, options are financial derivatives that give their holders the right to buy or sell a specific asset by ... Read Full Answer >>
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