Fair Trading Around the World
31 Pages Posted: 8 Aug 2006
Date Written: February 2006
The purpose of this paper is to explore differences among countries in perceptions of the fairness of trading in financial markets and offer these perceptions as measures of social capital in financial markets.
What are the differences in the perceptions of insider trading among different countries? Are the judgments of students similar to those of finance professional? Are rules of fairness in financial markets similar to rules of fairness in non-financial markets?
I use surveys to elicit rules of fairness from two segments of the community, finance professionals and university students, in eight countries, Australia, India, Israel, Italy, the Netherlands, Tunisia, Turkey and the U.S. I find that majorities of professionals and students in the U.S., the Netherlands, Israel and Australia consider insider trading unfair while majorities of students and substantial portions of professionals in India, Tunisia, Italy and Turkey consider insider trading acceptable. Students are more lenient than professionals in their ratings of insider trading in all countries. I also find that rules of fairness for trading stocks are different from rules of fairness for trading cars. For example, students in Tunisia and Turkey judge sellers of cars who have inside information about defective transmissions as less fair than they are judged by students in the U.S. and the Netherlands. But students in Tunisia and Turkey judge sellers of stocks based on inside information as more fair than they are judged by students in the U.S. and the Netherlands.
Keywords: ethics, fairness, international, trading, insider trading, enforcement
JEL Classification: G10, G14, G15, G18
Suggested Citation: Suggested Citation