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It's not rigged. If you think the stock market is rigged, you'd have to apply similar lens to the factors that influence it like inflation stats, employment num

It's not rigged. If you think the stock market is rigged, you'd have to apply similar lens to the factors that influence it like inflation stats, employment numbers, gold and other metals prices, interest rates, and currently, home prices, food and fuel prices, and all the other scientifically collected data that supports policy. Markets are the sum of the information everyone has about prices (even if that's not evenly distributed), and if you could co-ordinate to rig that, you could rig literally anything. If it were even possible to rig any, let alone all, of those things, the whole thing would be as fragile as the narrative that held it together. It couldn't exist. We'd only ever be one viral tweet away from total civilizational meltdown. I get that connected insiders need more scrutiny and maybe making some high profile examples would set the tone, but that some bad actors don't bring the whole thing down is more of a feature than a bug in this case.

wtallis 5y ago
> Markets are the sum of the information everyone has about prices (even if that's not evenly distributed), and if you could co-ordinate to rig that, you could rig literally anything. The market being rigged (in the casual sense used here) does not require anyone to be manipulating all of the factors that affect prices; you just need to be able to cheat on some input to the system. Trading on non-public information may not always be a successful strategy because you might get unlucky and some other factors could unpredictably outweigh the impact of the insider information you're basing your trades on—but on average, insider trading works until/unless you are caught and prosecuted.
xpe 5y ago
> Markets are the sum of the information everyone has ... This leaves out some key facts: different people have access to information at different times. It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. This isn't disputed.
- sokoloff 5y ago
  I agree insider trading isn’t fair. It’s much less clear to me that insider trading harms market efficiency. I think we accept the increased inefficiency (from barring insider trading) in the name of fairness and resulting trust in the market.
  - xpe 5y ago
    This is interesting reading: Laffont, Jean-Jacques, and Eric S. Maskin. "The efficient market hypothesis and insider trading on the stock market." Journal of Political Economy 98.1 (1990): 70-93.
- jkhdigital 5y ago
  > It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. How is this not good for market efficiency? Insiders have material information about company performance. Trading on that information means that it is (marginally) reflected in the market price. That sounds like a more efficient market to me. Also, I’d like to see your full specification of “fairness” in capital markets. Stock markets are not casinos, they are economic tools for directing capital to its highest use. “Fairness” doesn’t seem like a relevant factor here.
  - wtallis 5y ago
    Making markets more efficient should not be an end goal for any public policy. However, making markets fair is a non-pathological goal for public policy to work toward.
    - xpe 5y ago
      What particular political philosophies make this particular claim?
      - wtallis 5y ago
        What claim?
  - xpe 5y ago
    This is debated. I'm not an expert in the field; I'm not sure how "hotly" debated it is. Some sources to consider include: 1. From Brittanica' ProCon.org: https://insidertrading.procon.org/view.answers.php?questionID=001055 https://insidertrading.procon.org/view.answers.php?questionI... 2. Finnerty, Joseph E. "Insiders and market efficiency." The journal of finance 31.4 (1976): 1141-1148. From the latter: > THE STRONG-FORM of the efficient market hypothesis assumes all available public and private information is fully [reflected] in a security's market price. The strong-form, in terms of market participants, also assumes that no individual can have higher expected trading profits than others because of monopolistic access to information. One possible test of the strong-form is to determine whether insiders earn better than average profits from their market transactions. To ascertain if the market is truly efficient will involve determining how well insiders do relative to the market in general. To date, some work has already been done in evaluating rates of return earned by insiders trading for their own accounts. ... I would wager (in a prediction market) that many people who cite the efficient market hypothesis may be unaware of the second sentence in the quote above.

wtallis 5y ago

> Markets are the sum of the information everyone has about prices (even if that's not evenly distributed), and if you could co-ordinate to rig that, you could rig literally anything. The market being rigged (in the casual sense used here) does not require anyone to be manipulating all of the factors that affect prices; you just need to be able to cheat on some input to the system. Trading on non-public information may not always be a successful strategy because you might get unlucky and some other factors could unpredictably outweigh the impact of the insider information you're basing your trades on—but on average, insider trading works until/unless you are caught and prosecuted.

xpe 5y ago

> Markets are the sum of the information everyone has ... This leaves out some key facts: different people have access to information at different times. It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. This isn't disputed.

sokoloff 5y ago
I agree insider trading isn’t fair. It’s much less clear to me that insider trading harms market efficiency. I think we accept the increased inefficiency (from barring insider trading) in the name of fairness and resulting trust in the market.
- xpe 5y ago
  This is interesting reading: Laffont, Jean-Jacques, and Eric S. Maskin. "The efficient market hypothesis and insider trading on the stock market." Journal of Political Economy 98.1 (1990): 70-93.
jkhdigital 5y ago
> It isn't fair (and it isn't good for market efficiency) for insiders to act on their inside information. How is this not good for market efficiency? Insiders have material information about company performance. Trading on that information means that it is (marginally) reflected in the market price. That sounds like a more efficient market to me. Also, I’d like to see your full specification of “fairness” in capital markets. Stock markets are not casinos, they are economic tools for directing capital to its highest use. “Fairness” doesn’t seem like a relevant factor here.
- wtallis 5y ago
  Making markets more efficient should not be an end goal for any public policy. However, making markets fair is a non-pathological goal for public policy to work toward.
  - xpe 5y ago
    What particular political philosophies make this particular claim?
    - wtallis 5y ago
      What claim?
- xpe 5y ago
  This is debated. I'm not an expert in the field; I'm not sure how "hotly" debated it is. Some sources to consider include: 1. From Brittanica' ProCon.org: https://insidertrading.procon.org/view.answers.php?questionID=001055 https://insidertrading.procon.org/view.answers.php?questionI... 2. Finnerty, Joseph E. "Insiders and market efficiency." The journal of finance 31.4 (1976): 1141-1148. From the latter: > THE STRONG-FORM of the efficient market hypothesis assumes all available public and private information is fully [reflected] in a security's market price. The strong-form, in terms of market participants, also assumes that no individual can have higher expected trading profits than others because of monopolistic access to information. One possible test of the strong-form is to determine whether insiders earn better than average profits from their market transactions. To ascertain if the market is truly efficient will involve determining how well insiders do relative to the market in general. To date, some work has already been done in evaluating rates of return earned by insiders trading for their own accounts. ... I would wager (in a prediction market) that many people who cite the efficient market hypothesis may be unaware of the second sentence in the quote above.