Notes on Meaning And Description Of Speculation In Management:

          Speculation is defined as intelligent and rational forecasting of future trend of prices on the basis of concrete information and knowledge of the past and present conditions and then entering the market either as a long time buyer (bull) or short seller (bear)

          Speculation is not only science but is also an art. It demands considerable amount of accurate and updated information. Detailed analysis and rational interpretation of the information is also required to be done precisely and correctly.

          Speculation requires expertise, foresight as well as financial soundness to shoulder the risk of loss. It is an intelligent struggle of well equipped knowledge against the rough power of chance. It assumes the risk of loss arising out of unfavorable change in the price of a commodity or security.

Features Of Speculations:
  1. Speculation is intended with capital gains
  2. Speculation assumes the risk of loss whereas investment is transfer of risk of loss.
  3. A speculator acts as a risk bearer.
  4. A speculator changes his position in the market time to time even very frequently. Sometimes as a buyer and sometime as a seller.
  5. Speculation transactions are settled not by giving or taking the goods but by making payment of the price differences. If the price change is favorable, the speculator receives the differential amount. But id the price change is adverse, the speculator pays the differential amount between the two prices.
Kinds Of Speculators:

           Broadly speaking there exists three kinds of speculators who operate on the organized forward market.

1. Bulls:

                     A person who believes that the current prices are too low and will rise in the future is called a bull operator. He buys shares or goods with a view to sell them at higher price and thereby make a capital.

2. Bears:

          A bear is a person who believe that the current price is too high and is about to fall or they are bound to decline in the near future. He sells shares or goods with the expectations to buy them at cheap rates. A bear forecasts selling price.

3. Stag:

          He is a special type of bull operating in the new issues market and he applies for a large number of shares in the new issue with the intension of selling those new shares quickly at a premium and make capital profit even before his name is enrolled in the Register Of Members. He is not a genuine investor and creates artificial or temporary demand for new issues. As soon as he receives his letter of allotment, he will try to sell them to other buyers at a considerable premium. The stag activity in the new issue market is undesirable and destabilizes as well as demoralizes the markets of new issues.