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Sophisticated investors frequently choose to publicly disclose private information, a phenomenon inconsistent with most theories of speculation. We propose and test a model to bridge this gap. We show that when a speculator cares about both short-term portfolio value and long-term profit, a disclosure mixing asset fundamentals and her holdings is optimal by inducing competitive dealership to revise prices toward those holdings while alleviating adverse selection. We find that when mutual fund managers have stronger short-term incentives, the frequency of strategic non-anonymous disclosures about their stocks by market-worthy newspaper articles increases and those stocks' liquidity improves, consistent with our model. [ABSTRACT FROM AUTHOR]

This study examines the long memory properties in the volatility of the foreign exchange markets of Egypt, Ghana, Kenya, Nigeria and South Africa. Applying the FIEGARCH model to daily data from June 2, 1997, to December 31, 2021, we find long memory in the second moment of return innovations across all five countries' foreign exchange markets and significant first-order positive autocorrelation. To isolate spurious long memory, we perform a structural break test and find that structural breaks in all five foreign exchange markets do not affect long memory. The findings may have implications for risk management. Historical volatility-based investment methods can generate risk-adjusted returns innovations. Long memory may indicate unexploited profit for risk-seeking speculators and international investors in these countries' financial assets. Also, official intervention should be random and rule-changing to reduce currency market predictability. [ABSTRACT FROM AUTHOR]

I test the hypothesis that the use of leverage by market speculators can increase the likelihood and magnitude of crashes in asset prices. Using a direct leverage measure derived from US public filings, I find that (1) stocks held by highly leveraged hedge funds subsequently have more negatively skewed returns than stocks held by less leveraged funds and (2) upon extremely negative earnings surprises or funding liquidity shocks, stocks owned by high-leverage funds exhibit abnormal price declines and subsequent reversal. Consistent with the fire sale and contagion hypothesis, high-leverage funds tend to reduce the position following negative news about a stock, and such selling can extend to other stocks in the portfolio, increasing the crash proneness of the stocks they hold. [ABSTRACT FROM AUTHOR]

This study evaluates the dual role of hedging pressure (HP) in oil futures markets and analyses its effects on weekly oil volatility. We find that HP driven by hedgers' insurance demands is negatively related to volatility, while HP driven by speculators' short‐term liquidity demands is positively related to volatility. Oil volatility tends to be more responsive to speculators' short‐term liquidity demands than variations induced by hedgers' insurance demands. These channels are also significant determinants of volatility in inverted and normal markets, with the effects being more pronounced in inverted markets. Under low financial and business‐cycle risk environments, the two HP channels typically have a measurable impact on volatility. These opposing effects of HP on weekly volatility provide empirical support on the significance of the dual role of hedgers in oil markets, as price insurance seekers and as short‐term liquidity providers. [ABSTRACT FROM AUTHOR]

This study investigates the notion that agency-driven information asymmetry may affect a firm's stock liquidity. I postulate that less uncertainty about managerial agency problems may enhance liquidity provision by lowering dealers' perceived adverse selection risk from trading with better-informed speculators. Consistent with my conjecture, I find that the staggered adoption of antitakeover provisions across U.S. states in the 1980s and 1990s — a plausibly exogenous shock unambiguously reducing the threat of (and speculators' information advantage about) value-enhancing intervention — robustly improves the stock liquidity of affected firms relative to peer firms, especially at prior high  fundamental or agency uncertainty and with poor governance. (JEL D22, G14, G34) Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Many high-value experience goods, such as pianos and Chinese zithers, are usually characterized by uncertain future values. As such, a portion of customers (called 'consumers') may hesitate to buy the product because they are unsure of the product's actual value and/or they may expect to buy the product at a lower price in the future. Moreover, the fluctuating future value creates arbitrage opportunities for another group of customers (called 'speculators') who may benefit from stocking up a product and reselling it at a higher price at a future time. Considering a firm that sells a limited number of high-value experience goods over two periods, this paper investigates the profitability of a rent-to-own (R2O) contract, under which a consumer can return the product in the future period (e.g. when it turns out to be inappropriate) or buy the product at the realised future price. We study the optimal pricing decisions involved in the R2O contract for two scenarios. In the base model, the uncertain future price is exogenously given, and in the extended model, the future price is endogenously determined by the firm and speculators. Numerical experiments are conducted to evaluate the value of R2O contracts. [ABSTRACT FROM AUTHOR]

We use an experimental asset market with eye-tracker measurements for a novel exploration of the cognitive validity of a classic heterogeneous trader taxonomy. Following a top-down approach, we assume that the patterns of information acquisition are governed by one of the three trading strategies, either feedback, passive, or speculative. In line with our first hypothesis, speculators seek information about market expectations. Notwithstanding the two other hypotheses, feedback traders reveal patterns of information acquisition that could ex ante be expected from passive traders, and vice versa. [ABSTRACT FROM AUTHOR]

We establish a model in which speculators use feedback trading characteristics to infer the behavior of irrational investors and induce them to trade. We also discuss the stability and time series of asset prices. Our results show that: (1) speculators have speculation and arbitrage demands and make "noise" to induce irrational investors to trade, (2) the time series of asset prices show stable momentum and a reversal effect when fundamental traders dominate the market, and (3) momentums are unstable and perform poorly under extreme circumstances. Our article offers a unique approach to understanding the micro mechanism of different momentum effects in various markets and suggests a plausible theoretical framework to illustrate such differences. [ABSTRACT FROM AUTHOR]

The article presents a dossier that analyzes the dynamics of the border between Venezuela and Brazil, highlighting the biodiversity of the area and the social problems caused by deforestation and illegal mining. It also mentions the high unemployment and poverty in both countries, which has increased social segregation. The article emphasizes the importance of preserving the cultural heritage of the region and addresses the institutional and environmental challenges faced by the borders. It highlights that territorial occupation on the border involves different actors, from small farmers to businessmen and real estate speculators. Despite the challenges, progress has been made in terms of governance and sustainable use of natural resources in border areas. The article is an important academic analysis for understanding the complexity of borders and promoting equitable and sustainable solutions. [Extracted from the article]

This paper tests the hypothesis that long‐short speculators are able to generate short‐term investment returns based on their sentiment for 12 agricultural commodity futures. For this purpose, we dynamically model the equidirectional trading of long and short commodity futures of long‐short speculators as a proxy for their market sentiment. We find evidence that the sentiment period returns are considerably positive and differ significantly from neutral sentiment periods for all commodities, which underlines the sentiment's relevance. In line with the empirical literature, we can reject the argument of price manipulation as the price continues to develop into the direction of the sentiment period although long‐short speculators trade non‐directionally in the following. We rather indicate the existence of a short‐term time‐series momentum effect, which can be robustly identified without the requirement to define an external model parameter. From the superior sentiment‐based momentum returns, we conclude that long‐short speculators have valuable, exclusive information, which cannot be replicated by observing their trading activity with a time lag of eight trading days. We also find that a sentiment‐based momentum strategy generates significantly higher returns than the long‐short speculators have realised in the 15‐year sample period which we attribute to the complexity of the long‐short speculators' investment strategies. [ABSTRACT FROM AUTHOR]

In this article, we present a Social Network Analysis–based approach to investigate user behaviour during a cryptocurrency speculative bubble in order to extract knowledge patterns about it. Our approach is general and can be applied to any past, present and future cryptocurrency speculative bubble. To verify its potential, we apply it to investigate the Ethereum speculative bubble happened in the years 2017 and 2018. We also describe several interesting knowledge patterns about the behaviour of specific categories of users that we obtained from this investigation. Furthermore, we describe how our approach can support the construction of an identikit of the speculators who maneuvered behind the Ethereum bubble analysed. Finally, we show that this capability of supporting the hunting for speculators is intrinsic of our approach and can cover past, present and future bubbles. [ABSTRACT FROM AUTHOR]

Using data from the Los Angeles area from 1988 to 2012, we study the behavior and sources of returns of individual investors in the housing market. We document the existence of two distinct investor types. The first act as middlemen, purchasing substantially below and reselling above market prices throughout the cycle, improving liquidity and the existing capital stock in the process. The second act as speculators, who primarily enter during the boom, buying and selling at essentially market prices. Neither type anticipated the housing bust. We document similar behavior by speculators and middlemen in 96 other U.S. metro areas. [ABSTRACT FROM AUTHOR]

I derive the incentive compatible and individually rational mechanism that maximizes the sum of the buyers' ex-ante expected utilities. I also show that this mechanism minimizes the seller's revenue. When payments are required to be non-negative, my mechanism takes the form of an arbitrarily weighted lottery with no participation fees, and the resulting allocation is generally not ex-post efficient. This means that before learning their valuations and if side payments from the seller to the buyers are not allowed, buyers as a group would be better off if they gave up ex-post efficiency in order to avoid positive payments. When transfers are allowed, the optimal mechanism is a standard auction with no reserve price and where the seller's income is redistributed back to the buyers. This mechanism is robust to speculators if a buyer with value 0 never partakes in the redistribution. [ABSTRACT FROM AUTHOR]

A recent study shows that index futures prices are influenced by the index's liquidity. This research describes the state of the index futures market following the epidemic as seen by index futures mispricing affected by liquidity and volatility during the outbreak. [ABSTRACT FROM AUTHOR]

The newly launched water futures market faces a serious illiquidity problem with scarce trading volume. We examine the causes of the illiquidity based on the futures contract design literature and empirical analysis of spot water markets in the western United States. The primary cause of illiquidity is a lack of effective hedging demand for water futures due to the heterogeneity and limited size of spot water markets. The opaqueness of the water futures settlement index further deters the participation of traders. Moreover, the lack of public information on spot water market transactions also reduces its attraction to speculators. [ABSTRACT FROM AUTHOR]

This paper explains why and how an intermediate level of restrictions on speculative reselling may be optimal for the firm. Speculative reselling has long existed in many markets. Speculators purchase products that are in limited supply to resell at inflated prices later. A somewhat puzzling observation is that although firms often impose restrictions on speculation, we rarely observe actions that completely eliminate it. This paper explains why and how an intermediate level of restrictions on speculative resale may be optimal for the firm purely from the perspective of the firm's most desired amount of such resale, that is, without reliance on the decision space constraints. We consider a firm with limited capacity and consumers deciding whether to buy the product in advance (before their individual valuation uncertainty is resolved) or to wait at the risk of an increased price or sold-out product. We find that consumer willingness to pay in advance and the firm's profit may indeed be maximal at an intermediate level of restrictions on speculative reselling. Extending the model to allow consumer-to-consumer resale, we obtain that in our model, whenever an intermediate level of speculative reselling is optimal without the consumer ability to resell, this ability would hurt the firm. This may further explain why resale restrictions may be formulated in such a way that only knowledgeable resellers (speculators) are able to circumvent them. History: Yuxin Chen served as the senior editor and Anthony Dukes served as associate editor for this article. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mksc.2022.1383. [ABSTRACT FROM AUTHOR]

The limits of arbitrage explain how a speculative bubble is sustained; they do not explain how likely one is to occur. To do that, you need a theory about the thing that sporadically causes arbitrageur constraints to bind. I propose a first such theory, which is based on social interactions between speculators. The theory says that bubbles should be more likely in assets where increases in past returns make excited-speculators relatively more persuasive to their peers. I empirically verify this ex ante prediction about bubble likelihoods and show that it is robust to some ex post disagreement about bubble definitions. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4351. [ABSTRACT FROM AUTHOR]

Motivated by the capital outflow episode after the 8/11 renminbi exchange rate reform, we establish formal models to study renminbi exchange rate policy under depreciation pressure with a focus on its effect on market expectations. In an economy where capital controls are imposed, a central bank aims both to discourage speculative capital outflows and to reduce exchange rate misalignment. We find that (i) both capital controls and speculators' uncertainty about the central bank's exchange rate target can effectively discourage capital outflows; (ii) Any action taken by the central bank will send a signal to speculators about the central bank's exchange rate target, causing a change in speculators' expectations and subsequently in capital flows. This explains large capital outflows triggered by the 8/11 reform. A key takeaway is that exchange rate policy should take into account its effect on market expectations to avoid unnecessary exchange rate and capital flow volatility. [ABSTRACT FROM AUTHOR]

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The "Black Thursday" crisis in cryptocurrency markets demonstrated deleveraging risks in over‐collateralized noncustodial stablecoins. We develop a stochastic model that helps explain deleveraging crises in these over‐collateralized systems. In our model, the stablecoin supply is decided by speculators who optimize the profitability of a leveraged position while incorporating the forward‐looking cost of collateral liquidations, which involves the endogenous price of the stablecoin. We formally characterize regimes that are interpreted as stable and unstable for the stablecoin. We prove bounds on quadratic variation (QV) and the probability of large deviations in the stable domain and we demonstrate distinctly greater price variance in the unstable domain. We identify a deflationary deleveraging spiral by means of a submartingale. These deleveraging spirals, which resemble short squeezes, lead to faster collateral drawdown (and potential shortfalls) and are accompanied by higher price variance, as experienced on Black Thursday. We conclude by discussing noncustodial ways in which the issues raised in this paper can be mitigated. [ABSTRACT FROM AUTHOR]

We provide a model to understand the effects of commodity futures financialization on various market variables. We distinguish between financial speculators and financial hedgers and study their separate and combined effects on the informativeness of futures prices, the futures price bias, the comovement of futures prices with other markets, and the predictiveness of financial trading. We capture the interactions between commodity futures financialization and the real economy through spot prices and production decisions. A dynamic extension illustrates how key variables change over time in a period of acute financialization in a way that is consistent with observed empirical patterns. [ABSTRACT FROM AUTHOR]

We propose a simple agent-based computational model in which speculators' trading behavior may cause bubbles and crashes, excess volatility, serially uncorrelated returns, fat-tailed return distributions and volatility clustering, thereby replicating five important stylized facts of stock markets. Since each speculator bets on his own (technical and fundamental) trading signals, stock prices are excessively volatile and oscillate erratically around their fundamental value. However, speculators' heterogeneity occasionally vanishes, e.g. due to panic-induced herding behavior, yielding extreme returns. Lasting regimes with high volatility originate from the fact that speculators extract stronger trading signals out of past stock price movements when stock prices fluctuate strongly. Simulations furthermore suggest that circuit breakers may be an effective tool to combat financial market turbulences. [ABSTRACT FROM AUTHOR]

This study aims to investigate the relationship between the spot and futures commodity markets. Considering the complexity of the relationship, we use a nonlinear autoregressive distributed lag (NARDL) framework that considers the asymmetry and nonlinearity in both the long and short run. Based on the daily returns of six commodity indices reaggregated on three commodity types, our study reaches some interesting findings. Our analysis highlights a bidirectional relationship between both markets over the short and long run, with a greater lead for the futures market. This result confirms the future market's dominant contribution to price discovery in commodities. Changes in commodity prices appear first in the futures market, as informed investors and speculators prefer trading on this market that is characterized by low costs and a high-leverage effect. Then, the information is transmitted from the futures to the spot market through arbitrageurs' activity, which explains the nonlinearity of the relationship. These results are helpful to scholars, investors and policymakers. [ABSTRACT FROM AUTHOR]

This study empirically investigates the spillover between exchange rate risk and sectoral returns in Pakistan over the period of 1992–2017 using high-frequency data. Building on the Wavelet-multi-resolution-extended dynamic conditional correlation GARCH (MRA-EDCC GARCH) model, our findings suggest that exchange rate risk transmission to sectoral stock returns is scale-dependent. The extent of mean and volatility spillover prevalence varies across different scales. Hence, homogenous trading strategies for short-term and long-term investors may not be favorable. The finding further reveals that the risk transmissions are notable over the short run. In the context of cross spillover, there is greater evidence of exchange rate volatility impact on sectoral returns, whereas, few sectoral returns are found to affect exchange rate. Our results are robust to alternative methods of causality and short-run volatility spillover through GARCH-in-mean SVAR model. Our findings provide useful implications for risk mitigation of portfolio managers and speculators. [ABSTRACT FROM AUTHOR]