April 11 (Reuters) – There are a bunch of kids out there
trading on inside information, and you, me and the rest of the
economy are paying the price.
A study of trading patterns in Finland shows a highly
suspicious pattern of activity in accounts held on behalf of
In reality, it is probably not the kids themselves who are
playing at being junior insider traders, but instead it is their
guardians who are likely using juvenile accounts as a safer way
to profit from non-public knowledge.
What’s worse, the data also demonstrates how the market
detects which companies’ stocks are most plagued by “informed
investing” and then imposes a penalty which effectively reduces
both investor returns and overall economic growth.
Using data on a half a million accounts from Finland from
1995 to 2010, the study came to a surprising conclusion:
accounts set up to benefit kids 10 years and under did really
well at stock picking, and did especially well just before
mergers, earnings releases and events that generate big stock