Bans on insider trading 'attempt to create a level playing field in the stock market, but they do so badly while inhibiting economic efficiency.'
Washington, DC (PRWEB) March 21, 2012
Significant negative consequences result from the ban on insider trading, reveals economics expert Jeffrey A. Miron.
Those negatives include:
- "[A] less efficient allocation of the economy’s capital."
- Rewarding dishonest insiders and putting law-abiding insiders at a "competitive disadvanage."
- An implicit support of the view "that individuals should buy and sell individual stocks." Miron explains why "virtually everyone should just buy index funds since picking winners and losers mainly eats commissions, adds volatility, and rarely improves the average, risk-adjusted return."
- Bans make "it harder for the market to learn about incompetence or malfeasance by management."
Professor Miron concludes that there is little justification for bans on insider trading. "They attempt to create a level playing field in the stock market, but they do so badly while inhibiting economic efficiency."
BIO: Jeffrey A. Miron is Senior Lecturer and Director of Undergraduate Studies in the Department of Economics at Harvard University and Senior Fellow at the Cato Institute. Miron is the author of Libertarianism, from A to Z.
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