Insider Trading Ahead Of A Coup

It’s well known that back in the 50s, the CIA engaged in some un-democratic stuff in Latin America, in order to look out for US business interests. You know, coups. The coup in Guatemala, overthrowing Jacobo Arbenz Guzmán, benefitted United Fruit Co., for example

Slate reports on an interesting paper from the field of forensic economics suggesting insiders familiar with the coup during the planning stages were able to profit in the stock market from their knowledge. Basically, by looking at the timeline of planning meetings, and associate that with stock price movements, they demonstrated that insiders must have been trading. If you think about it, it’s not really surprising that this trading would happen, but the fact that they can deduce this is pretty cool.

Now what would be really interesting? If you could reverse-engineer foreign policy plans by looking at unexplained stock movements — like if you could anticipate a coup in, say, Venezuela by looking at movements in the price of oil stocks.

It’s unlikely, but perhaps it’s not that ridiculous. Remember when the Federal Government toyed with setting up a prediction market to help anticipate terrorism? The plan was roundly slammed (duh), but it was based on the notion that people with knowledge of terror attacks wouldn’t be able to resist trading on their knowledge.

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