Re: Saw this on CNN: Anonymous Stock tips over IRC as bad???

[dlv@bwalk.dm.com (Dr.Dimitri Vulis KOTM)]

"Perry E. Metzger" <perry@piermont.com> writes:
> Jeff Barber writes:
> > I trust it won't stun you to find that many, many large and even small
> > corporations -- including my current employer [*NOT* SecureWare, BTW,
> > despite the email address] -- actually encourage their employees to buy
> > stock by offering stock purchase plans as a benefit of employment.
>
> Yup. Indeed, its perfectly legal and even common to trade in the stock
> of your own company, even if you are a corporate officer. HOWEVER,
> that doesn't mean that you are safe against insider trading charges.

High-level corporate officers have to file a special form with the SEC
whenever they trade the stock of their corporation. This information is
then publicly available. The Wall St. Journal reports monthly on large
insider trades reported to the SEC. I'm aware of at least one service (in
Florida) that takes the paper forms from SEC, does data entry, and sells
the data in computer-readable form.

Several studies showed something interesting:

a) If someone trades with the insiders, s/he'll have the same returns as
the market or worse;

b) If someone follows only the highest-level insiders (directors and CEO's)
as soon as their trades become known (which is about 4 weeks after the trade),
they'll generally beat the market.

This seems to indicate that a) insiders on the average are misguided,
b) highest level insiders do profit from their insider knowledge.

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<a href="mailto:dlv@bwalk.dm.com">Dr.Dimitri Vulis KOTM</a>
Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps