It is not easy to decide when the costs exceed the benefits one likely instance is inside information during take-over bids. Costs also occur because of the resources wasted by investing in activities of high private but low social value. Costs are the increase in bid-ask spreads - as market makers fear that they may be dealing with insiders - which acts as a tax on trading. Benefits occur when information is more quickly disseminated in the markets, improving the choices of decision makers. It is not always clear who are the guilty insiders and who are the victims and insider trading has benefits as well as costs. Insider trading is more than a theft of information.
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