Speculation Index

Posted in Finance, Accounting and Economics Terms, Total Reads: 427
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Definition: Speculation Index

It is measured by the ratio of the trading volumes of the American Stock Exchange (AMEX) versus volumes on the New York Stock Exchange (NYSE). The rationale behind the speculation index is that as most traded stocks on the American Stock Exchange are speculative, whereas stocks traded on the NYSE are bigger and more established, a higher ratio signifies an increasing degree of speculation, whereas a lower ratio implies a decreasing amount of speculation.


Speculative investment transpires at collectively high levels when there is a normally bullish market sentiment. Because of this, when the speculation index touches abnormally high levels, most analysts and investors consider that it is a signal to the end of an upward trend.


In 2008, the NYSE Euronext acquired the American Stock Exchange and announced that now, the exchange would be called as the NYSE Alternext US. The former was renamed as NYSE Amex Equities in March 2009. These alterations have made stand-alone trading volumes of American Stock Exchange tough to source and track, because of which the relevance of speculation index as a measure of speculative activity has diminished over a period of time.

 

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