Speculative trading and stock market volatility

Abstract

The contribution of speculation to volatility in financial markets has been a concerne policymakers in the U.S. at least since the turn of the century. The committee appointed b Governor Hughes of New York to study securities markets after the Panic of 1907 mad recommendations "directed to the removal of various evils now existing and to the reduction of th volume of speculation of the gambling type." The Great Crash of 1929 reinforced anti-speculation sentiments and led to a number of securities regulations, including the initial margin requirement set by the Federal Reserve.