Essay on Asymmetric Information

Drivers who forgo purchasing insurance create a problem that is of great concern to auto insurance policy holders, insurers and the general public. In addition to paying for insurance that covers their own actions, insured drivers pay a portion of the costs incurred by drivers without insurance through uninsured motorist coverage. For insurers, costs associated with uninsured motorist claims can be substantial.

Insider trading – insider trading is the trading of a corporation’s stock or other securities by individuals with potential access to non-public information about the

"Insurance companies should judge you on how you drive, not who you are," said J. Robert Hunter, CFA 's Director of Insurance and former Texas Insurance Commissioner. "Insurance companies are penalizing good drivers by hundreds and sometimes thousands of dollars each year based on economic and social status, and the end result is that the poor pay more, much more."

Automobile companies are often wary of insuring individuals that do not follow the rules of the road. This is because they are more likely to pay a lot of expenses to cover the costs of accidents or other violations. Because there is such a risk involved, these companies may charge individuals a higher

In the article “SOX- Context and Theory: Market Failure, Information Asymmetry & The case for regulation …volume 9(3), Professor Jasso argued that Sarbanes Oxley Act is a principle that be used only for the “ethical and moral boardroom in the public corporation”, however, it is intensely more than that (Jasso, 1). In other words, Professor Jasso had many reasons to proof that the act itself had made a positive impact to the financial and managerial accounting since the ‘July 30, 2002’ (Jasso, 1). He described how SOX had made

Insider trading has brought competition to the market place by giving shareholders, private investors, and other interested individuals the opportunity to bring in revenue. The average American household lives paycheck to paycheck. The stock market opens a new world for those individuals that are wanting to own electronic currency or a tangible good. This can also create another source of income for them as well “…the long-term investors who hold their stock will share in the price rise that good news will bring, and their holdings will be worth a greater amount in the market” (Henry B. Manne, Insider Trading and Stock Market (1966) p.457). Another benefit that insider trading bring, is it that creates new competition in the market for companies to strive more on making their product worth more. Therefore, their stock will be worth more as the company continues to rise above the

In Economics, information asymmetry refers to decision making in transactions where one side has more or better information than the other, creating an imbalance of power and knowledge in the decision making of that specific transaction. Asymmetric information can cause transactions to steer away from appropriate, planned or expected course being taken. A venture capital firm is a group of investors who gain income from the

The AA recently revealed that insurers are instead using factors other than gender to provide premiums for their customers. Insurers are analysing the correlation between a range of different characteristics and the likelihood of policyholders being liable in personal injury claims and motor vehicle accident claims - such as age, occupation, type of vehicle, experience and postcode - to determine the premiums each customer should be offered.

People with a bad driving history are in for a rude awakening, once they apply for new car insurance or renew a policy. They quickly realize that a bad driving history affect car insurance rates in a very negative way. However, much depends on the insurance company that is selected. Some insurance companies will give a bad driver a better deal than others might. The fact is that the average car insurance company will look at that bad driving history and think that the driver is a big risk. Insurance companies would rather avoid drivers that are risky because they lose money on the deal.

The terrible credit drivers can likewise meet all requirements for sizeable rebates on online cheap quotes car insurance on the off chance that they have a not too bad driving history. A car proprietor with poor credit must attempt to manufacture and keep up a decent avoiding so as driving record petty criminal offenses and mishaps. They can likewise lessen the expense of their insurance by deciding on a little and modest car. Numerous poor credit drivers decrease their insurance cost by picking to purchase a joined arrangement forever, car, and property holder's

Insurers also look at the gender and age of the driver, credit score, profession, marital status and location.

In the criminal case, US v. James Herman O'Hagan (1997), and in the civil case, McDonald v. Compellent Technologies, Inc. (2011), both cases involved the criminal act of insider-trading that were tried in different court systems. Insider-trading is an illegal act involving an individual who has access to nonpublic information about a public company’s stock or other securities who uses the information to make profits that are not available to regular investors. The seriousness of insider-trading relates to the economic downfalls related with the act that affect economic markets. Insiders have an abundance of information that is not yet available to the public, thus, making the insider-trades unfair and illegal of insiders who take advantage to profit from information that has not been released to the public for public trading and transparency (Cui, Jo & Li,

Individuals who are sick are more likely to purchase health insurance than healthy people. This “sicker population” might utilize a significant amount of healthcare services. In order to cater to this demand insurance companies will resort to raising the premiums, dissuading healthy people from buying insurance. As the pool of people covered by insurance becomes sicker it continues to drive up costs leading to a vicious cycle where each year fewer and fewer healthy individuals obtain insurance. This process is called adverse selection.

For example, Manna (1966) states that insider trading should be allowed because insider trading is the most effective way to compensate to insider to generate new economic information in firm. Hirshleifer() states that for insider, good information is as good as bad information to make profit but this profit may not be related to economic contribution of insiders in corporate. Proponents of insider trading suggest (Carlton and Fischel (1983) that insiders are the most informative member in the market, and by trading, they bring new information to the markets and causing prices to change toward their true value and, therefore, promoting the optimal allocation of resources. On the other hand, Scholars (Benabou and Laroqu, 1992) say that insider trading may provide incentive to corporate insiders either to delay the announcement of price-sensitive information to public or to prevent to release price sensitive information, which in turn makes stock prices less informative. However, Georgakopoulos (1993) argues that restriction on insider trading may have little adverse impact on market efficiency but it reduces the cost of transaction that burdens on uninformed traders

Corporate directors and officers often obtain advance inside information because of their positions. Sometimes the information can affect the future market value of the corporate stock. It is obvious that their positions can give them a trading advantage over the general public and shareholders. Often times the insider is the company manager; other times it is the company's lawyer, investment banker, or even the printer of the company's financial statement. Anyone who has knowledge before public dissemination of that information stands to benefit from good news or bad news.