A speculative bubble is an unjustified and prolonged steep rise in the price of stocks, raw materials or real estate. The speculative bubble is not due to real changes in the underlying economic data, but to the exaggerated profit expectations of speculating investors.
Inexperienced investors in particular are often driven by euphoric media reports and reports from analysts who forecast lasting increases in profits. As a result, these investors are pushing into the market in anticipation of rising share prices and prices and driving prices up further.
Speculative bubbles are often difficult to explain rationally and often difficult to identify. If such a speculative bubble bursts because the real value of the speculative object is finally recognized and there are no more buyers, the dream of quick wealth bursts. Prices continue to fall and investors and participating companies suffer heavy losses. An example of this was the collapse of speculation in Internet and telecommunications stocks in Germany in 2000. The price losses in the end were often more than 90 percent.
Speculative fund - Money is withheld in the speculative fund in anticipation of cheaper investment opportunities. According to Keynes, the speculative fund is an important part of the demand for money.
See also "Liquidity Preference Theory"
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