Question: It has been argued by some, including Milton Friedman, that insider trading of publicly traded stocks should be allowed. The rationale is that trading stock

It has been argued by some, including Milton Friedman, that insider trading of publicly traded stocks should be allowed. The rationale is that trading stock with inside information can actually lead to trading based on more timely, accurate information about the financial health of companies. (

Those with inside information, in other words, would move the market toward a more efficient allocation of capital, more quickly, because insiders would know when to buy and sell at a price that reflects the true value of the stock based on a company's performance.

In an short explanation develop an criticism of this efficiency-based defense of insider trading; specifically, what reasons are there to reject this line of thinking?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

FNIE Ltd is a company specializing in the import of alcohol. It has a warehouse based on the Rungis International Market south of Paris (rue du Pont des Halles, 94550 Chevilly-Larue). The society...

Please read case Question 1. Describe the ethical situation in the case, ie what was the ethical dilemma? Question 2. Explain what caused the ethical scandal, for example, what was the root cause, in...

the the chances of organizational misconduccted 79. Visit the FBI's web site and review a posting entitled 2009 financial Crime report. Read the General Overview, Initiatives, and significant cases...

Case 2-1 Are Classifications of Accounting Outmoded? Consider the following statements by David Cairns, former secretary general of the International Accounting Standards Committee.26 When we look at...

Spencer Duck (SSSN 000-22-111) is single and his eight year old son, Mitch, lives with him nine months of the year in a rented condominium at 321 Hickory Drive in Ames, Iowa. Mitch lives with his...

Complete three Tax Forms (Attached blank forms 2015 schedule D, 1040 and 8949). (Refer to the instructions PDF attached): Spencer Duck (SSSN 000-22-111) is single and his eight year old son, Mitch,...

I would like to get a help with completing three Tax Forms (Attached blank forms 2015 schedule D, 1040 and 8949). For the question: (Refer to the instructions PDF attached and Refer totax return...

Complete three Tax Forms 2015 schedule D (attached). (Refer to the instructions PDF attached): Spencer Duck (SSSN 000-22-111) is single and his eight year old son, Mitch, lives with him nine months...

Here is a copy of Schedule D and Form 8949 for completing the required assignment,Instructions for all IRS forms are a great resource and can be found at www . irs .gov. Here are links to...

B orders Group (including many former Waldenbooks rebranded as Borders Express) liquidated its assets and closed all of its locations in the second half of 2011. The previous year had already seen...

B wants to transfer $10,000 to C, but makes an error filling in the online form, and the money ends up in A's account. Does A have an obligation to return the money to B? if so, on what grounds?

Using the earned value analysis technique, a project manager calculates a schedule performance index of 0 . 7 5 and a cost performance index of 1 . 2 5 . To bring the schedule back on track, the...

A piston, mp = 5 kg, is fitted in a cylinder, A = 15 cm 2 , that contains a gas. The setup is in a centrifuge that creates an acceleration of 25 m/s 2 in the direction of piston motion toward the...

The voltages vR(t), vL(t), and vC(t) in the circuit shown can be drawn as phasors in a phasor diagram. Show that vR(t) + vL(t) + vC(t) = vS(t).

A 2017 Pew Research poll found that 28% of cell phone users do not use a screen lock for security on their smartphones. If 500 smartphone users were surveyed, how many do not use a screen lock on...

Describe three alternative profit measures that can be used to measure divisional performance. Which measures are preferable for (a) Measuring divisional managerial performance (b) Measuring...

Let T be a minimum spanning tree of a graph G = (V, E), and let Vbe a subset of V. Let Tbe the subgraph of T induced by V, and let G be the subgraph of G induced by V. Show that if T is connected,...

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

Distinguish between ethical, moral and legal wrongdoing and assess the importance of a particular misdeed.

Which of the follow ing items is reported in the in\ esting section of the statement of cash tlou s when a stock investment is sold? a. the subtraction of a resulting gain on the sale b. the addition...

Analyse the complex consequences and motives that typically attend ethical and moral issues in management, business and organisations.