Abstract
Speculative markets are those where the price expected to prevail in the future has a profound effect upon the current price. In these markets, the relevant stock is large relative to the relevant flow. Examples of these markets are: foreign exchange, where the ratio of short term foreign currency claims to the value of trade is large; commodity markets where the ratio of inventory to current consumption is large; the government securities market where the ratio of the existing stock of government securities to the current budget deficit is large; the stock market where the outstanding stock is large relative to new issues.
I thank Akio Yasuhara for his criticisms of an earlier draft and his suggestions for revision, which I have followed, and to Robert Brooks who supplied the Australian data. This paper also benefitted from comments received at seminars at Monash University and at the Handelshogskolan in Stockholm.
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Stein, J.L. (1991). An Evaluation of the Performance of Speculative Markets. In: Phlips, L. (eds) Commodity, Futures and Financial Markets. Advanced Studies in Theoretical and Applied Econometrics, vol 21. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-3354-8_6
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DOI: https://doi.org/10.1007/978-94-011-3354-8_6
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