Using privileged information to manipulate markets: insiders, gurus, and credibility

Access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements. The fact that privileged information is noisy interferes with the public's attempts to learn whether such announcements are honest; it allows opportunistic individuals to manipulate prices repeatedly, without ever being fully found out. This leads us to extend Sobel's [1985] model of strategic communication to the case of noisy private signals. Our results show that when truthfulness is not easily verifiable, restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

What Were They Thinking? Insider Trading and the Scienter Requirement

On its face, the connection between insider trading regulation and the state of mind of the trader or tipper seems intuitive. Insider trading is a form of market abuse: taking advantage of a secret to which one is not entitled, generally in breach of some kind of fiduciary-like duty. This chapter examines both the legal doctrine and the psychology associated with this pursuit. There is much conceptual confusion in how we define unlawful insider trading—the quixotic effort to build a coherent theory of insider trading by reference to the law of fraud, rather than a more expansive market abuse standard—which leads to interesting psychological questions as to the required state of mind. Is it always simple greed? What if there is an element of unconscious misperception—or rationalization—at work? My sense is that the causal explanations for what is charged as insider trading are sometimes quite murky and not easily explained as pure greed. The chapter thus tries to connect the law of insider trading to a more sophisticated approach to state of mind, motivation and causation

The first phase of the internationalisation process: export determinants in firms of the Former Soviet Union

A fundamental part of the transition process is for firms to integrate with the world economy. After having been denied access for many years to world markets under totalitarian rule and the auspices of the CMEA, this will require significant advances in labour productivity, product technology, marketing and managerial know how. Following the collapse of the CMEA and the ensuing decline in domestic demand producers in economies of transition have been forced to export to developed markets, in particular to the EU. Some economies of Central and Eastern Europe (in particular Poland, Hungary and the Czech Republic) have successfully managed to reorientate their trade to Western Europe. In contrast Russia and the European CIS have lagged behind. This study attempts to examine those firms in Russia, Ukraine and Belarus which have succeeded to export to the West. By employing linear, logistic and autoregression factors which figure in the firm's decision process of exporting shall be identified. The impact of ownership, firm characteristics and managerial attitudes on a firm's export propensity and intensity shall also be discussed

Friends with Benefits: Redefining Personal Gain in Insider Trading Under Salman v. United States

Since Congress has not enacted a statute outlawing insider trading, or the trading of securities based on non-public information, outright, courts have struggled to define what constitutes insider trading. The Supreme Court held that a fiduciary duty was breached when the insider privy to the information receives a “personal benefit.” This Commentary analyzes a pending Supreme Court case, Salman v. United States, which addresses whether pecuniary gain is needed to constitute the personal benefit necessary for insider trading, or if certain relationships are enough for the tip to inherently create a personal benefit for the insider. The author argues that a “personal benefit” can occur when there is (1) a quid pro quo or (2) the relationship between insider and tippee is intimate enough to automatically lead to a benefit for the insider. This conclusion follows Supreme Court precedent and is consistent with the policies for outlawing insider trading