Thursday, September 15, 2011

More Notes About the Worthless Stock Inefficency

Some more notes about the worthless stock inefficiency:

  • The SEC’s 2003 annual report [pdf] talks about their campaign against worthless stocks: “During 2003, we received numerous complaints from investors who purchased stock in bankrupt companies under the mistaken belief that the stock price would rise when the company emerged from bankruptcy. In each case, however, the company had announced in its plan of reorganization its intention to cancel its existing common stock and to issue new stock.”
  • In a paper called Who Gambles in the Stock Market [pdf] by Kumar (2009) shows that "poor, young, less educated single men who live in urban areas, undertake non-professional jobs, and belong to specific minority groups (African-American and Hispanic) tend to invest more in these lottery-type stocks."
  • In an article called Corporate Bankruptcy and Insider Trading [pdf] Seyhun and Bradley (1997) say that they find "significant sales by the insiders of firms filing bankruptcy petitions prior to the filing date."


Taylor Conant said...

By far the most hilarious CBS post yet! Two thumbs up for this early fall comedy tour!

CP said...

We'll be here all week.