Insider Trading: Definition, Prevalence, and Illegality

Ans 1:
Insider Trading is trading in the stocks with the knowledge of nonpublic material information.
The information which is available only to the insiders of the company like management or other
employees, if used to trade the stock before the news comes public is known as insider trading.
Traders can benefit a lot from Insider Trading as they can secure profits by pre entering or
exiting the stocks before the general public comes to know about it. (Dolgopolov)Insider trading
is Illegal in many countries ("Insider Trading Definition: What It Is And When It’S Illegal")as it
brings unfair advantage to the people who know the information and can disrupt an economy’s
stock market.
Despite the ongoing crackdowns and fear of prosecution, Insider trading is very much prevalent
in the USA("Insider Trading Definition: What It Is And When It’S Illegal"), and people use it to
gain an unfair advantage.
Ans 2:
Dow Jones Industrial Average(DJIA) is an index in the USA. It was launched in 1896 with only
12 US stocks, and now it indicates the value of the largest 30 publicly owned companies based
in USA who represent their industries The market capitalisation of these stocks are almost 1/4th
of the total US market. DJIA is a price-weighted index, so it is calculated by the price of the 30
stocks and then divided by a Dow divisor("Dow Jones Industrial Average (DJIA) - Overview,
History, & Components"). These 30 companies are also a part of the S&P 500 Index.
(AMADEO)