Why is it illegal to trade stocks based on inside information? Other than Martha Stewart, provide an example of someone who was trading stocks on inside information.

DISCUSSION 1

The book discusses the Efficient Market Hypothesis (EMH) and its three forms. The EMH has a lot to do with information and stock prices.

  • How does information get into prices?
  • How do we know if prices reflect all available information?
  • What are abnormal returns?
  • What does the EMH have to say about abnormal returns?

 

DISCUSSION 2

We all remember the story about Martha Stewart, who was accused of insider trading.  If not, take a moment to research this incident, then answer the following:

  • Why is it illegal to trade stocks based on inside information?
  • Other than Martha Stewart, provide an example of someone who was trading stocks on inside information.

200 WORDS EACH MIN.