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.

BREAKING DOWN '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 >>
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    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 >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. How attractive is the food and beverage sector for a growth investor?

    The food and beverage sector is attractive for a growth investor. The sector's high degree of volatility means it tends to ... Read Full Answer >>
  5. What techniques are most useful for hedging exposure to the insurance sector?

    Investing style determines the best hedging techniques for the insurance sector. This sector comprises three segments, two ... Read Full Answer >>
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    Retail is an attractive sector for a growth investor due to its propensity for turning in bigger-than-average gains when ... Read Full Answer >>

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