Reading Comprehension

PT148 · S2 · P3 · Q18 Insider-Trading

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Passage A Insider-trading law makes it a crime to make stock transactions, or help others make stock transactions, based on information you have ahead of the general public because of your special position within a company.

Topic

Arguments for and against insider trading in the stock market

Framework

Present Debate

Main Point

Passage A argues that insider trading helps make stock prices more accurate and benefits the market, while Passage B argues that insider trading undermines fairness and investor confidence. - The Most Valuable Sentences: - Passage A: (Fourth paragraph) - Passage B: (Second paragraph)

P1 (Passage A): Definition of Insider Trading

Explains what insider trading is—using special, non-public info to trade stocks or help others trade.

P2 (Passage A): Questioning the Logic

Questions whether using exclusive information isn’t just what markets are all about; says the job of a stockbroker is to use information that others may not have yet.

P3 (Passage A): How Markets Work Best

Claims markets work best when information spreads quickly and widely, and that allowing people with good info to act helps prices reflect reality.

18.

Passage A, unlike passage B, seeks to advance its argument by

  1. applying general principles to particular

    Unsupported Both

    It does seem like either passage provides a specific example of insider trading or non-trading. Without any specific examples, we can't say either passage applied a principle to a particular.

    8% picked this

  2. Correct

    pointing out similarities between a

    Why this is right

    In arguing that insider trading shouldn't be so controversial / hated / criminal, the author of Passage A compares it to any other form of gaining knowledge that others don't have. The second paragraph is pointing out the similarities between insider trading and all other kinds of trading, which are condoned and accepted. - the very definition of a functioning stock market - the entire field of stock brokering is based on this - this just means you've done your homework Most explicitly, in passage A's final paragraph, she points out the similarities between insider trading and insider nontrading, and establishes that the latter is uncontroversial: This is certainly happening every day, and rightfully so. No one would think to lock someone up for it. The argument B is making is that insider trading is criminal and should be controversial. It wouldn't really behoove his purpose to compare it to something uncontroversial. That would make it seem benign, and this author thinks that insider trading is a bad thing that could lead to a loss of investors and widespread financial repercussions.

    Skill tested: Method · how this choice captures the passage's function is the move to repeat next time.

    70% picked this

  3. describing the consequences that would

    Definitely in Passage B

    Without thinking too hard about Passage A, we can get rid of this by realizing that B's final two paragraphs are all about describing the consequences of allowing insider trading: unfairly compromises market makes it nearly impossible for others to earn money leads to a loss of investor confidence could lead to widespread financial repercussions

    6% picked this

  4. showing how a specific activity

    Definitely in Passage B

    Without thinking too hard about Passage A, we can get rid of this by realizing that B's final two paragraphs are all about showing how insider trading relates to the larger context of investors in the stock market. In B's 2nd paragraph, it shows: In insider-trading, some people make investment decisions based on info others don't have, who can't make similarly informed decisions. That unfairly compromises the market ... making it difficult or impossible for other people to earn money in the stock market. That definitely qualifies as showing how the specific activity of insider trading relates to the larger context of a healthy vs. compromised market.

    12% picked this

  5. examining the motivations of an

    Both or Neither

    Depending on how we interpret "motivations of participants", we would say it's in both passages or neither. If we just mean their economic motivation (they are using their inside information because they are trying to make wise, optimal decisions with where to invest their capital), both passages covered this. If we mean "motivations" more on that accusatory moral level, then neither passage really got into whether inside trading was being done by the sinister or the pure of heart.

    3% picked this

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