• Card 94 / 100: *How do successful speculators reduce the volatility of stock prices?

    Answer:
    A stock price is volatile when it bounces around a lot, rather than moving within a narrow band. Stock speculators, if they are profitable, tend to reduce the band in which a stock price moves. If a stock price is above where it "should" be, the astute speculator will sell it, pushing down the price. If the price is originally too low, the astute speculator will buy the stock, pushing up the price.

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Capitalism: The Market Economy

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Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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