Effects of Insider Trading: Analysis, Should It Be Legalized

This paper will examine the practice of insider trading asserting that it should be legalized. It will also explain how it relates to and affects the economy.

Utilitarian ethics judges actions by their outcomes, and from this perspective, "buyers are no worse off as a result of having purchased from an insider than they would have been if they had purchased from a noninsider" (McGee, 2008, p. 59). From this theoretical perspective, at least, there is therefore nothing wrong with insider trading.

. . .
idual "would not be accused of reaping unjust profits, even if the identical stock was purchased for the same price the insider would have paid" (McGee, 2008, p. 58). Its beneficial effects include the fact that it serves to communicate market information, thus making markets more efficient (McGee, 2008, p. 59). By watching what insiders do, investors can pattern their investments likewise, moving the company's stock price closer to its true value (McGee, 2008, p. 59). Prohibiting insider trading blocks this vital flow of information, causing insiders to block their trades or avoid making them at all and depriving the public of this insider information (McGee, 2008, p. 59). Outlawing insider trading, on the other hand, "may have long-term adverse effects on the economy" (McGee, 2008, p. 61). Since insider trading improves market efficiency, one of the first effects of outlawing insider trading is a less efficient market (McGee, 2008, p. 61). According to Jarrell et al. (1988, as cited in McGee, 2008, p. 61), "Hostile takeovers will be more difficult to make, so shareholders will lose, since shareholders tend to benefit by hostile takeovers." Insider trading laws also result in "compliance and escape
. . .

Some common words found in the essay are:
According Jarrell, Findings Despite, Aspect Utilitarian, Analysis Insider, Introduction Insider, Summary Insider, insider trading, SEC Rasmussen, Retrieved March, mcgee 2008, rasmussen 2009, insider trading laws, McGee RW, trading laws, mcgee 2008 61, level playing, 2008 61, mcgee 2004, playing field, level playing field, mcgee 2008 59, 2008 59, Insider Trading, 2004 4, mcgee 2004 4,
Approximate Word count = 1317
Approximate Pages = 5 (250 words per page)