Given that Poly has granted me the ability to time travel....

[Kuciwalker]

In KrazyHorseLand the cherry orchards would just sell futures to ensure price stability.

[Flubber]

Flubber: the entire point is that insider trading makes the unavailable information available. Making the information available sooner increases efficiency by reallocating capital sooner than it otherwise would have been.

But insider trading doesn't make the information available earlier. The insiders (assuming sufficient capital) would drive the price to where it "should be" based on the information, to the benefit of the insiders

For example some people know company X's financial results 2 days before they are released and trade to great benefit. The information is still released at the same time as it would have been absent the insider trading

[Flubber]

Any discussions I have seen about market efficiency references AVAILABLE information (as in available to all) driving the price.

Uhhhh.....NO



The WHOLE POINT OF THE MARKET is to aggregate various pieces of information together with judgment in order to represent everything as a single price.

I agree with this statement as a statement of the obvious. But the 'market" will only aggregate information that becomes available to someone who will share it or act upon it. If you think the market is actually reflecting ALL relevant information that EXISTS . . . well lets just say I don't think that can be what you are saying since I never thought you would ever be that simplisticly naive.

[flash9286]

But insider trading doesn't make the information available earlier. The insiders (assuming sufficient capital) would drive the price to where it "should be" based on the information, to the benefit of the insiders

For example some people know company X's financial results 2 days before they are released and trade to great benefit. The information is still released at the same time as it would have been absent the insider trading

The insiders buying or selling a related security would be information by itself. Or if they insiders aren't disclosed then the increased demand or selling would also be information.

[Kuciwalker]

But insider trading doesn't make the information available earlier. The insiders (assuming sufficient capital) would drive the price to where it "should be" based on the information, to the benefit of the insiders

For example some people know company X's financial results 2 days before they are released and trade to great benefit. The information is still released at the same time as it would have been absent the insider trading

No, the price is the information. Prices are how information is aggregated and distributed in market economies.

[Al B. Sure!]

No, the price is the information. Prices are how information is aggregated and distributed in market economies.

You know what he meant by information... he meant the release of financial data or something else relevant to value of a security.

However, the point still stands. Flubber, the issue you're having is with this concept that the market isn't efficient because there are asymmetries in information which is true and the efficient market hypothesis is simplistic... however, can you see how restrictions on insider trading do not help the matter at all but actually restrict prices reflecting all information about the security? You're having potential buyers/sellers who know something about what the price of a security should be not allowed to act until a particular date (earnings release or FDA approval for a drug, for example). If they could act sooner, the sooner the price would reflect all information, and the sooner the price would be 'accurate'. Now, how much power the insiders have to affect the market price significantly? That depends. Probably not very much although if insider trading were legal and more institutional investors acted upon it, the effects could be significant.

[KrazyHorse]

No, the price is the information. Prices are how information is aggregated and distributed in market economies.

Thank you.

Will have further points when I get home.

[Kuciwalker]

You know what he meant by information... he meant the release of financial data or something else relevant to value of a security.

Yes, I knew what he meant by information, but he didn't know what I meant by information, and that meaning is foundational to economics.

[KrazyHorse]

Market discovery

[Al B. Sure!]

Yes, I knew what he meant by information, but he didn't know what I meant by information, and that meaning is foundational to economics.

You're right. I didn't notice that his reference to information was in response to when you first brought it up with regards to information being price.

[Flubber]

All I was saying is that there is information (in the generic meaning of the term) which some insiders will have which is not yet reflected in the price (assuming such insiders honor the blackout periods etc etc and the data is truly not known .

In the current regulatory environment the market will NOT be efficient with respect to such information if it is truly unknown to the market . How can it be ?

KH seems to favor the idea that insider trading be allowed. As someone that has been an insider I would have liked that. I could have made what for me would have been a very significant amount of money on a few occasions. My earliest question was along the lines of why would a government or regulator see this as a good thing. ON an individual level it would seem to be a very good thing for insiders LOL

[Al B. Sure!]

Because more information is being reflected in the price, Flubber. So the price will be more reflective of what it 'should' be.

[KrazyHorse]

Yes, it's price fixing. It's geared towards price stability. Artificial or not, it does achieve that.

So what? By limiting producer competition he is HARMING CONSUMERS. There is no way around that. Whether or not he is also harming producers is dependent on how far below market equilibrium he's driving production. A bit below and he increases prices enough to more than make up for the drop in volume. Too far below, and their profits

I've always been rather vocal about my dislike of price fixing (high or low), agricultural subsidies, and the like. I had much the same reaction you display here when I initially learned about it. I'm not so sure now. This way prices are stable (regardless if you like how they are stabilized or not) at close to the most affordable levels cherries can be produced and the business still be economically viable.

This is a retarded set of claims made throughout time by idiots who have absolutely no appreciation of how markets work. "If we didn't increase prices then the farmers would go out of business and prices would go way up for everybody".

I can see how the alternatives probably don't work out as well for consumers and a good share of current producers.

I can't. Then again, I tend to believe in reason, unlike you.

I'd agree it would be better if this particular work there weren't necessary. But it is a rather important function given how things are set up. He's there to watch out for consumer's interests.

No, he isn't. He's there to watch out for producers', if his job description is what you claim it is.

BY RESTRICTING PRODUCER COMPETITION HE INCREASES CONSUMER PRICES. PERIOD.

This is in the US. He takes a flight to Michigan one weekend a year. As for his real job, which he's mostly retired from, is consulting for various agricultural businesses around the world. He has a PhD in some sub-field of horticulture which I can't recall the name of (and no... it has nothing to do with gender ).

Too bad he doesn't know any economics. He'd resign immediately.

[KrazyHorse]

All I was saying is that there is information (in the generic meaning of the term) which some insiders will have which is not yet reflected in the price (assuming such insiders honor the blackout periods etc etc and the data is truly not known .

Exactly. that is why insider trading increases efficiency; through the ACTIONS OF THE INSIDER TRADERS the price will be pushed toward a more realistic place.

In the current regulatory environment the market will NOT be efficient with respect to such information if it is truly unknown to the market . How can it be ?

The current regulatory environment bans insider trading. They aren't inside traders if they don't trade.

KH seems to favor the idea that insider trading be allowed. As someone that has been an insider I would have liked that. I could have made what for me would have been a very significant amount of money on a few occasions. My earliest question was along the lines of why would a government or regulator see this as a good thing. ON an individual level it would seem to be a very good thing for insiders LOL

On a market level it would have been a good thing too.

There are two reasonable objections against insider trading (one of which is very weak, and I believe was mentioned earlier, and one of which is very strong and has not been mentioned).

Flubber, why is it that we can't force lawyers to testify against their clients?

[KrazyHorse]

But insider trading doesn't make the information available earlier. The insiders (assuming sufficient capital) would drive the price to where it "should be" based on the information, to the benefit of the insiders

For example some people know company X's financial results 2 days before they are released and trade to great benefit. The information is still released at the same time as it would have been absent the insider trading

And for those 2 days the insiders have moved prices closer to reality, increasing efficiency.

I don't tell the farmer WHY I want an apple; SIMPLY BUYING IT transmits information, even if I remain anonymous.