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Speculation, in finance, involves taking on risk in the hope of future profit. This often occurs in financial markets, which are arenas where prices are formed for the exchange of financial assets. While historically these were physical places, modern markets are increasingly virtual, with trading happening electronically.12

The core function of financial markets is to redistribute risk from those who are more risk-averse to those who are less so. Speculation arises when participants seek higher-than-average returns, which inherently involves accepting greater risk. This can lead to increased volatility, as market confidence can evaporate, triggering selling activity and exposing the risks embedded in speculative assets.2

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