A Middle Ground on Insider Trading
6 Pages Posted: 12 Jan 2010
Date Written: January 11, 2010
The debate over insider trading usually proceeds in all-or-nothing terms: either all insider trading should be permitted by law or none should. This article argues that the law should permit insider trading that decreases the price of an overvalued security or equity, but should prohibit insider trading that would increase that price. The reason for the different treatments is that over-valued equities often have a long-term negative effect on shareholders while the long-term effect on undervalued equities is ambiguous.
Suggested Citation: Suggested Citation