Reference Source:

Textbook: -Mankiw, N. Gregory. Principles of Macroeconomics, 6th ed. Mason, OH: South-Western Cengage Learning, 2011. ISBN: 9780538453066 (hard copy); ISBN: 9781115468523 (eBook)

Q.2. Critical Thinking:Financial System: The Basic Tools of Finance:Chapter 14:

When company executives buy and sell stock based on private information they obtain as part of their jobs, they are engaged in insider trading.

a. Give an example of inside information that might be useful for buying or selling stock.

b. Those who trade stocks based on inside information usually earn very high rates of return. Does this fact violate the efficient markets hypothesis?

c. Insider trading is illegal. Why do you suppose that is?

Important Note: -Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles.