The Effects of Derivatives on Prices of the Underlying: A Synthesis

Somanathan, T. V.; Nageswaran, V. Anantha

doi:10.1017/cbo9781316134566.009

Cited by 1 publication

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“…While it is true that options and futures potentially do have some economic value when used to hedge risk (Bartram, Brown, & Conrad, 2011; Moschini & Lapan, 1995), they do not have this value when used for speculative purposes, which they often are. Furthermore, the latest research would suggest that options and futures contribute to destabilization of market prices (Somanathan & Anantha Nageswaran, 2015). Evidence does indicate that short selling facilitates market liquidity and decreased volatility (Beber & Pagano, 2013; Sobaci, Sensoy, & Erturk, 2014).…”

Section: Resultsmentioning

confidence: 99%

The conceptual and empirical relationship between gambling, investing, and speculation

Arthur¹,

Williams²,

Delfabbro³

2016

J Behav Addict

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Background and aimsTo review the conceptual and empirical relationship between gambling, investing, and speculation.MethodsAn analysis of the attributes differentiating these constructs as well as identification of all articles speaking to their empirical relationship.ResultsGambling differs from investment on many different attributes and should be seen as conceptually distinct. On the other hand, speculation is conceptually intermediate between gambling and investment, with a few of its attributes being investment-like, some of its attributes being gambling-like, and several of its attributes being neither clearly gambling or investment-like. Empirically, gamblers, investors, and speculators have similar cognitive, motivational, and personality attributes, with this relationship being particularly strong for gambling and speculation. Population levels of gambling activity also tend to be correlated with population level of financial speculation. At an individual level, speculation has a particularly strong empirical relationship to gambling, as speculators appear to be heavily involved in traditional forms of gambling and problematic speculation is strongly correlated with problematic gambling.Discussion and conclusionsInvestment is distinct from gambling, but speculation and gambling have conceptual overlap and a strong empirical relationship. It is recommended that financial speculation be routinely included when assessing gambling involvement, and there needs to be greater recognition and study of financial speculation as both a contributor to problem gambling as well as an additional form of behavioral addiction in its own right.

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