Craig Newmark posts on how terribly terribly hard it is to be a member of Congress and not make inside trades.
Presumably our elected officials haven't heard of a blind trust.
See here for my early posts on the topic.
Showing posts with label insider trading. Show all posts
Showing posts with label insider trading. Show all posts
Tuesday, January 31, 2012
Tuesday, November 15, 2011
Insider trading on capital hill - mostly harmless...
So says a recent article. Basically, the practice is harmless in the big picture and is probably not worth worrying about.
Personally, I take a different view - seeing our elected leaders use their positions to make money off other investors doesn't really create confidence in our democratic process.
Remember that when someone profits from insider trading, someone else is loosing out - in this case the people who voted these leaders into office.
Personally, I take a different view - seeing our elected leaders use their positions to make money off other investors doesn't really create confidence in our democratic process.
Remember that when someone profits from insider trading, someone else is loosing out - in this case the people who voted these leaders into office.
Monday, November 14, 2011
60 minutes on insider trading by congress.
Last night, the CBS news program - 60 minutes - "exposed" legal insider trading by members of Congress. Apparently it is entirely legal for members of congress to trade on private information - you can read a nice summary on the InvestorCookbooks blog.
Basically our elected officials on either side of the aisle are trading using information that they gathered in their capacity as lawmakers. However, this actually isn't really new news. Several academic finance studies have shown that congressmen and women earn abnormal returns on their stock trades.
This story got me thinking about a blog post that I read on another academic finance blog recently. The basic gist of that post was that the Occupy Wall Street crowd are misguided in their claims that the system isn't fair. The blogger's view was that this is much like a child complaining about fairness.
But I think that the blogger was wrong - the issue of fairness is a serious issue. Whether you support the OWS movement or not, it seems that we should have a system that is a fair and level playing field. The system should not grant a select few the ability to trade and invest at the majority's expense. This type of fairness is not about everyone winning, or everyone getting a fair share, but is about a fair game where the rules are the same for everyone.
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Basically our elected officials on either side of the aisle are trading using information that they gathered in their capacity as lawmakers. However, this actually isn't really new news. Several academic finance studies have shown that congressmen and women earn abnormal returns on their stock trades.
This story got me thinking about a blog post that I read on another academic finance blog recently. The basic gist of that post was that the Occupy Wall Street crowd are misguided in their claims that the system isn't fair. The blogger's view was that this is much like a child complaining about fairness.
But I think that the blogger was wrong - the issue of fairness is a serious issue. Whether you support the OWS movement or not, it seems that we should have a system that is a fair and level playing field. The system should not grant a select few the ability to trade and invest at the majority's expense. This type of fairness is not about everyone winning, or everyone getting a fair share, but is about a fair game where the rules are the same for everyone.
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Tuesday, May 24, 2011
Stock picks by the House of Representatives
Following an earlier study that found that Senator's stock trades earned significant abnormal returns, a new study shows that the same effect exists for members of the House of Representatives.
I have no comment, at least none that is fit to print.
FYI: the original study was published in 2004 in the Journal of Financial and Quantitative Analysis (a top finance journal). The abstract states:
The actions of the federal government can have a profound impact on financial markets. As prominent participants in the government decision making process, U.S. Senators are likely to have knowledge of forthcoming government actions before the information becomes public. This could provide them with an informational advantage over other investors. We test for abnormal returns from the common stock investments of members of the U.S. Senate during the period 1993–1998. We document that a portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month, while a portfolio that mimics the sales of Senators lags the market by 12 basis points per month. The large difference in the returns of stocks bought and sold (nearly one percentage point per month) is economically large and reliably positive.
HT: George
I have no comment, at least none that is fit to print.
FYI: the original study was published in 2004 in the Journal of Financial and Quantitative Analysis (a top finance journal). The abstract states:
The actions of the federal government can have a profound impact on financial markets. As prominent participants in the government decision making process, U.S. Senators are likely to have knowledge of forthcoming government actions before the information becomes public. This could provide them with an informational advantage over other investors. We test for abnormal returns from the common stock investments of members of the U.S. Senate during the period 1993–1998. We document that a portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month, while a portfolio that mimics the sales of Senators lags the market by 12 basis points per month. The large difference in the returns of stocks bought and sold (nearly one percentage point per month) is economically large and reliably positive.
HT: George
Monday, March 7, 2011
I'm a supply chain guy - what do I care about insider trading?
In the ever more competitive world of stock analysis, any bit of raw data about a company that could be used to infer revenues or earnings is useful. Supply chain managers, and other professionals are often uniquely positioned to see this data. Sharing this data with outsiders though is illegal - it is insider trading.
The FT reports the case of Tony Longoria, a supply chain manager at Advanced Micro Devices who was moonlighting as a consultant for "Primary Global Research". Allegedly Mr L. was providing detailed information about AMD's shipments right before the company released earnings. He and several others now face insider trading charges.
The FT reports the case of Tony Longoria, a supply chain manager at Advanced Micro Devices who was moonlighting as a consultant for "Primary Global Research". Allegedly Mr L. was providing detailed information about AMD's shipments right before the company released earnings. He and several others now face insider trading charges.
Thursday, January 13, 2011
50 Cent manipulates stock prices with Twitter.
From the excellent Stephen Colbert.
http://www.colbertnation.com/the-colbert-report-videos/370860/january-12-2011/50-cent-makes-money-on-twitter
Note: some possibly inappropriate language.
http://www.colbertnation.com/the-colbert-report-videos/370860/january-12-2011/50-cent-makes-money-on-twitter
Note: some possibly inappropriate language.
Thursday, November 12, 2009
Call options and insider trading
My students know that options provide leverage. You don't have to exercise the option to profit, you just need to hold a call option while the stock price goes up. Your gain will be from the increase in the value of the option. My students also should know that insider trading is the practice of making trades based on private information.
So knowing all this, if you knew that HP was about to launch a takeover of 3COM, what would you do? Answer: buy calls on 3COM of course.* Turns out that's what a lot of people did.
*assuming you were willing to risk breaking the law.
So knowing all this, if you knew that HP was about to launch a takeover of 3COM, what would you do? Answer: buy calls on 3COM of course.* Turns out that's what a lot of people did.
*assuming you were willing to risk breaking the law.
Monday, September 21, 2009
Front running a merger
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