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Is The Market Rigged? Survey Says … ‘Yes!’

Daily Ticker

It's back to square one for the jurors in the insider trading case of hedge fund billionaire Raj Rajaratnam. Jurors will have top start the process all over again starting today after a juror was dismissed for "medical" reasons.

Meanwhile, more evidence the stock market is not a level playing field: 47% of respondents in a survey of 400 investors from across the world found one-on-one meetings with companies regularly lead to price sensitive information being divulged, according to the Rotterdam School of Management.

Surveys like this, along with the Rajaratnam trial, the saga over David Sokol's Lubrizoil trades and a overwhelming sense the market is stacked against them helps explain why mom & pop haven't piled back into stocks even after a more-than 2-year bull market.

In the accompanying interview The Daily Ticker's Aaron Task and Daniel Gross discuss just how prevalent insider trading is on Wall Street with Barry Ritholtz director of research at FusionIQ.

"It may not be completely and totally rigged but damn if the odds aren't against the average investor," exclaims Ritholtz. That does not however mean the pros are trading secrets amongst themselves. "Real inside information is actually surprisingly rare [but] I wouldn't be surprised if it's traded on pretty actively," he says.

In Ritholtz's experience what separates the successful professionals from the average individual investor is an information edge, in terms of research and analysis, not privileged information. Most of the rumors whispered around trading floors simply don't hold water, he says. "The best of the fund managers -- they're doing their own channel checks," i.e. legitimate research on industry trends from which they make informed bets about the fate of related companies.

Even if professionals are getting illegal tips from their one-on-one meetings, as the survey suggests, Ritholtz says there are few slam dunks, outside of inside information about pending mergers.

Either way, it's not the way you want the markets to function.

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