Explain how speculators actually regulate by Dr. Robert Murphy @Mises

Question 95 / 96: Explain how speculators actually regulate the stock market in a healthy and non-interventionist way.

Answer:

A speculator buys low and sells high, or short-sells high and buys

back low. A successful speculator therefore bids up underpriced

stocks, and pushes down overpriced stocks. Successful speculation

therefore makes stock prices less volatile for other, less

knowledgeable investors.

Sample Partial Credit Answer

Speculators correct mispricings in the stock market.

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https://www.jobilize.com/capitalism-the-market-economy-by-dr-robert-murphy-mises

Capitalism: The Market Economy

Access: Public Peer Review

Dr.Robert MurphyAssociated Scholar

Mises Institute

USA

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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