Checkout Carbon Black’s stock today before the announcement. It was way up, well before the news became public ....
https://www.cov.com/en/news-and-insights/insights/2018/11/se...
Stocks always seemed like legal gambling to me. If you can't predict it and you can't use any edge that others don't know about, then doing anything but using index funds is gambling, or am I missing something?
> Also insurance companies are basically bookies.
Hehe yes, it also occurred to me that being in a car accident is basically winning the insurance lottery that car owners pay into.
Also: https://en.wikipedia.org/wiki/Mosaic_theory_(investments). So you can get an edge by sourcing information from various places and piecing it together better than anyone else... that's fine as well.
> If you pickup a dollar bill on the ground, could you be accused of theft? Probably not...
Depends on the country - in some countries, yes, that is actually considered theft.
The only questions you have to ask yourself are: - is the information material? (would an average investor learning of it impact the stock price or valuation) - is the information non-public?
If the answer to both of the above is yes, you are insider trading, whether you heard about it from a friend, family member, or overheard someone in a bar. It's not only unethical to trade on such info, it's illegal.
Investing isn't zero-sum, there's no need to "win against" insider traders.
Alpha is the degree to which an investment outperforms "the market", where "the market" can be any benchmark you want to use. So yes, by definition, alpha is zero-sum in that not everyone can beat the benchmark, in the same way that not everyone can be above average.
But this tautology isn't particularly meaningful, because most people don't care about beating "the market"; they care about their financial health and solvency, and in many cases, slightly under-performing "the market" can still be perfectly acceptable for a lot of investors if the market is performing well enough and they've met their own expected targets.
(This is, in fact, the principle behind index funds: index funds will never beat the market, and are guaranteed to underperform the market after fees are taken into account, but yet many people still put their money in index funds).
Edit: by "I" I mean the company, not the CEO.