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Finance: What is Asymmetric Information? 25 Views
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Description:
What is Asymmetric Information? The idea of asymmetric information applies to basically all transactions. It exists in the financial world because knowledge and information is not equal; advisors know more about investments than their clients do, and that’s why they get hired. It also refers to the party selling having more knowledge than the party buying, or (less common) vice versa (because if someone is selling something they should be knowledgeable about it).
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Transcript
- 00:00
Finance allah shmoop what is asymmetric information Well asymmetry happens
- 00:08
when two sides of something aren't equal think giant red
- 00:13
wood and we'd regular crab and fiddler crab recumbent bike
- 00:18
and a eunice cycle well in the financial world asymmetric
- 00:22
information exists when one side of a transaction think inside
Full Transcript
- 00:27
trader scumbag who collects briefcases full of cash from somalia
- 00:31
in overlords versus a normal joe six pack investor trying
- 00:36
to fairly participate in the stock market So he has
- 00:39
a pension to retire on while bouncing great grandchildren on
- 00:43
his newly installed robotic knees Well discount needs don't go
- 00:48
there Your summer college job is cleaning the house of
- 00:52
the ceo of whatever dot com currently trading at eighteen
- 00:55
bucks a share as you empty her garbage one night
- 00:58
pushing away adult diapers in the process Yes she has
- 01:01
a lot of pressure on the job on this conference
- 01:03
calls and saying ooh a lot I push that away
- 01:07
You realize that microsoft is buying her company for thirty
- 01:10
dollars a share You then by a ton of stock
- 01:13
at eighteen bucks you had a symmetric information because you
- 01:18
dug through the trash and you found the memo from
- 01:20
whoever the ceo is of microsoft these days to her
- 01:23
and that was bad You didn't have to act on
- 01:26
that information like you could have just done a whole
- 01:29
lot of nothing and not repeated it to anyone and
- 01:31
left the stock at eighteen dollars until it was all
- 01:33
in the news at thirty and moved on and still
- 01:36
have your job cleaning her trash Having inside information isn't
- 01:40
illegal but doing something to benefit yourself tor You know
- 01:44
your loved ones is illegal So if you trade based
- 01:48
on inside asymmetric information well then you just committed a
- 01:52
felony It's called insider trading And while here's hoping you
- 01:56
look good and either orange or black or or both
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