Examples of insider trading in the following topics:
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- Share repurchases often give an advantage to insiders and can be used to manipulate financial metrics.
- This gives insiders an advantage because they are more likely to know whether they should sell their shares to the company .
- Martha Stewart was convicted of insider trading, which is not the same as insiders choosing whether to sell their shares in a share repurchase.
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- The weak-form EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information.
- The strong-form EMH additionally claims that prices instantly reflect even hidden or "insider" information.
- In semi-strong-form efficiency, it is implied that share prices adjust to publicly available new information very rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information.
- If there are legal barriers to private information becoming public, as with insider trading laws, strong-form efficiency is impossible, except in the case where the laws are universally ignored.
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- A country could join a trade bloc with other countries, forming a free trade zone.
- Accordingly, members of a trade bloc allow free trade between members while non-members face trade protection.
- Hence, a foreign company invests within a country to not only circumvent a trade barrier, but also gain more access to consumers who live within the trade bloc.
- For example, the North American Free Trade Association (NAFTA), a free trade zone between Canada, Mexico, and the United States, allows free trade among members, but each country erects its own customs to the outside world.
- Consequently, foreign companies have an incentive to invest inside the trade bloc gaining more consumers.
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- Initial public offerings are used by companies to raise expansion capital, monetize the investments of early private investors, and become publicly traded enterprises.
- After the IPO, when shares are traded freely in the open market, money passes between public investors.
- The offered shares are privately held by shareholders of the issuing company, which may be directors or other insiders (such as venture capitalists) who may be looking to diversify their holdings.
- Usually, however, the increase in available shares allows more institutions to take non-trivial positions in the issuing company which may benefit the trading liquidity of the issuing company's shares.
- The remainder, termed stockholder's equity, are kept inside the company and used for investing in the future of the company.
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- Supply for U.S. dollars comes from people holding U.S. dollars, and they trade those dollars for another currency.
- It can trade euros for U.S. dollars, causing the U.S. dollar to appreciate and the euro to depreciate.
- Consequently, if the Japanese government defaulted on its debt, the crisis would most likely remain inside of Japan.
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- To be able to trade a security on the NYSE, it must be listed.
- They must also disclose certain information to the exchange, providing a measure of transparency that prevents insider manipulation of the stock prices.
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- There are three major versions of the hypothesis: "weak," "semi-strong," and "strong. " The weak-form EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information.
- The strong-form EMH also claims that prices instantly reflect even hidden or "insider" information.
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- The first item is the trade balance, which equals total exports minus total imports, and it is usually the largest item.
- The U.S. trade balance was -$494.7 billion in 2011.
- Thus, a country is lending to foreigners because the value of foreign assets bought by residents exceeds the amount of assets foreigners bought inside the country.
- Consequently, these countries experience trade surpluses, causing more money to flow in than out.
- Thus, the U.S. debt and trade deficits go together, and we discuss them under the Hegemony section in this chapter.
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- the average weekly reported volume of trading in the securities on all national securities exchanges for the preceding four weeks
- the average weekly volume of trading of the securities reported through the consolidated transactions reporting system (NASDAQ)
- After one year, Rule 144(k) allows for the permanent removal of the restriction except as to 'insiders'.
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- The U.S. government requires investment bankers to disclose information to investors, helping to prevent risk and fraud.Unfortunately, investment bankers have access to inside information about corporate mergers.When a corporation takes over another corporation, the merger causes the company's stock price to soar.Thus, investment bankers can secretly buy stock or share information with friends and family who buys that particular stock.Insiders can earn a substantial amount of profit, and it is illegal in the United States.The Securities ExchangeCommission has the authority to investigate and to prosecute these cases.
- Over-the-counter (OTC) market does not have a physical location.Telephones and computers connect the dealers and brokers together.Both new and small firms are traded in the over-the-counter market.The OTC market in the United States is the National Association of Securities Dealers' Automated Quotation (NASDAQ), or commonly referred to as NASDAQ.New high-tech firms, such as Texas Instruments had started in NASDAQ and eventually switched their listing to a major exchange.Europe has their equivalent of NASDAQ, which theEuropeans call EASDAQ.
- Investment banks became involved in mortgages because they packaged mortgages into new exotic securities, which was tremendously profitable before 2007.Then stock prices began plummeting during 2008 until they had lost half their value.Some banks were particularly hit hard like Citigroup and Bank of America as their stocks traded below $1 per share, which was a significant drop.Investment bank, Lehman Brothers, declared bankruptcy, and it closed its doors to the financial world.Unfortunately, many Americans were on the verge of retirement, and many experienced a 50% or more decline in their pension funds, causing many workers to delay retirement.