We all are insider traders

Have you ever based some of your personal decisions on how things were going at work?  When business is booming and the perspective of a fat bonus becomes more pregnant, we might be tempted to buy the new car a little earlier than we would have under regular conditions. Conversely, when things turn sour at the office, we may postpone a series of superfluous buying decisions. Some economists may call it a boom and bust cycle, but some regulators may call it insider trading: True you do not trade directly on the stocks of your company for your own benefit, but you release precious information to the market not in an orderly way as legislation of the public equity market would require.

 Again, some economists may argue that you do no arm and that you do not provide any information that is not integrated into the current public prices. Really? Maybe this is more a situation where collecting and processing this information would be too coostly – and certainly a big problem from the privacy perspective. Anyhow, it would still have to be proven that with the results in hands, you really have an hedge over the market. A potential test for assessing if the wisdom of crowds do apply to insider trading.

Just to finish, I may just give an anecdotic side to the question of the value of inside information. In the course of my career, I’ve had often access to privileged information related in roles I played in different mergers and acquisitions. With my colleagues, we often tried to predict what would be the market reaction when the world will know through a presse release this precious pieces of information that we were the only one to posess for a few hours. Results are not dazzling, predictions were incorrect every other times, not much better than flipping a coin. So we may well all be insider traders in the end, but it may not give us an edge over other things than our personal decisions.

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