Re:Silicon Valley IT Administrator and Friends Charged in In...
by arkadiyt on Tuesday December 17, 2019 @09:37PM
(#21821250)
Chloe Xie published a research paper [1] on exactly the topic of how hard it is to profit despite advance knowledge of earnings results. It was summarized by Matt Levine in his aptly titled "Knowing the Future Isn’t That Helpful" [2].
[1]: http://chloexie.com/pdf/ChloeXie_JMP.pdf
[2]: https://www.bloomberg.com/opinion/articles/2019-11-26/knowin...
Re:Silicon Valley IT Administrator and Friends Charged in In...
by ENOTTY on Tuesday December 17, 2019 @09:59PM
(#21821365)
I also highly recommend playing the insider trading video game https://insider-trading-game.netlify.com/
Re:Silicon Valley IT Administrator and Friends Charged in In...
by jannes on Wednesday December 18, 2019 @04:24AM
(#21823203)
Wow, the game is literally showing Market Cap for the last quarter. Doesn't that sort of defeat the purpose of the game?
Re:Silicon Valley IT Administrator and Friends Charged in In...
by dehrmann on Tuesday December 17, 2019 @11:06PM
(#21821676)
> mergers/acquisitions
This one's easy. Buy shares of the acquisition, wait for a 10%-50% pop on the news.
Trading on earnings is hard. Even if you check earnings against estimates, did they beat the street? How's the forward guidance look? And you only get four shots per year.
I used to develop and sell novel earnings forecasts which would outperform analyst consensus. Typically my research would have a <1% margin of error on forecasting a specific KPI directly relevant to corporate revenue and profit for an equity. The best hedge funds were able to successfully trade on this information because they combined it with a significant amount of complementary data.
But I would not want to develop a trading strategy based on that data alone. These guys did very well considering the information they had to work with and how primitive trading earnings is. The real money in insider trading is in more illiquid OTC markets, or in mergers/acquisitions.