Study: Insider Trading Rampant

A study by professors at NYU and McGill looked at market movements before hundreds of M&A deals from 1996 through the end of 2012 and found that insider trading likely occurred in about 25 percent of them, while only 4.9 percent were litigated by the SEC. According to the study’s authors, the odds of their results appearing by chance are three in one trillion. The study found that “informed trading” is more common in cash deals. The study also found, not surprisingly, that the bigger the deal and the more trading it generated, the more likely insider trading would occur. More surprising was the finding that there was no correlation between the number of advisers and the likelihood of information being leaked. The professors suggest a number of possible reasons for the SEC’s distance from so much of the insider action, ranging from the basic fact it’s “resource constrained” to a misguided emphasis on stock as opposed to options trading.