Q 1: What is the difference between insider information and private information? When does private information become insider information?
Q 2: Some investors have the ability to purchase resources such as software and proprietary research. Is it unethical or unfair to allow some investors to have resources that others don't? How is this practice different from having access to inside information?
Q 3: Why would influential publications or star analysts be able to move prices? When is it ethical to trade on talent?
Q 4: If an analyst learns some nonpublic material information on a site visit to a company, should he or she trade on it?
Q 5: Student cheating can also be thought of as unequal access to information, for example, getting the exam questions the night before the exam. Can you think of other types of cheating that also depend on information? In what ways can faculty eliminate unfair use of information in accessing student performance? What are the parallels in the unfair use of information in securities markets?
Q 6: Identify three characteristics that describe an ethical analyst, and explain why they are important to investors.
Q 7: Besides investment banking relationships, list at least three other sources of potential conflicts that can compromise an analyst's independence.
Q 8: Explain how hubris can cause a positive bias in analysts' earnings forecasts.
Q 9: Identify the reasons that analysts might follow other analysts' recommendations and forecasts.
Q 10: What conflicts do analysts have with their employers?