#16 - Global Reference, Must Be True, Author's Perspective

[Administrator]

Please post below with any questions!

[ChicaRosa]

I originally chose B under timed conditions but is it wrong because Passage B agrees with this answer choice but not A?

Is C correct because in Passage A (ln 24-30 ) and Passage B (ln 40-42)?

Thanks!

[Adam Tyson]

In short, Chica - yes. Good job.

[Margo]

Hi,
I can see why C is correct, but I have trouble ruling out B.

For C, I can tell that both authors agree that it's OK for investors to gain an advantage by superior stock analysis because of lines 11-15 (Passage A: "If you analyze a stock, decide that it's overvalued, and sell it...it means you've done your homework") and lines 40-42 (Passage B: "Success in the market can then be gained only by skill in analyzing the info"). So, although author A is OK with insider trading and author B isn't, they both think it's okay for some people to be better at analyzing stock info than others.

I had trouble ruling out answer B because I thought that both authors would agree that in an ideal world, all info would be available to all stock market participants at the same time. Author A says that "stock markets work best when all the relevant info about a company is spread as widely as possible, as quickly as possible" (lines 16-18) and that people should act on the info they have right away, so that stock prices have a "more accurate assessment of all the relevant facts" (lines 27-29). Am I interpreting this incorrectly? Any clarification would be appreciated.

Author A thinks that all info should be available to all participants at the same time because of their definition of transparency and how it is a basic principle of the stock market: "In a transparent market, info that influences trading decisions is available to all participants at the same time" (lines 38-40).

Thanks

[James Finch]

Hi Margo,

Answer choice (B) fails because we are looking for something that will be true for both authors. The author of Passage B would likely agree, but reading the last paragraph of Passage A shows us that its author sees the possession of "inside knowledge" as a good thing. If all people had access to all knowledge, there wouldn't be any insider knowledge. Passage A wouldn't be happy about that.

Hope this helps!

[mab9178]

Hi

I arrived at the correct answer through the process of elimination.

However, I was puzzled by the usage of the word "superior" in the correct answer-choice, C. I know from knowledge outside the passages that it takes "superior" research and analytical skills to make money in the stock market; but as far as the passages are concerned, I feel that the word "superior" is NOT made explicit (I would even argue that it was not made implicit); or am I wrong, and the idea of "superior analysis" is made clear in the passages?

I do know, per Adam Tyson's guidance, that we're looking for the "best answer-choice," but I want to know whether I am missing strong language such as "superior," and so my question concerns my understanding of the language in the passage: Is this one of those scenarios where we select the best answer-choice and move on, or am I wrong and the word "superior" is clearly conveyed in both passages only I missed it?

A response is greatly appreciated!

Thank You
Mazen

[Adam Tyson]

We can infer that both authors would agree with this statement based on how they described the operation of the market, Mazen. Author B said "success is based on individual merit and skill." It seems that they would agree that someone with greater skill has an advantage over someone with less skill, and that's fine. As long as the market is transparent such that both parties have an equal change to assess all relevant information, it's okay for one to do better because they are better.

Author A said "If you analyze a stock, decide that it is overvalued, and sell it, you are taking advantage of knowledge that many others don’t have. That doesn’t make you a criminal; it means you’ve done your homework." That, too, sounds like the author believes that it's okay to gain an advantage by doing a better analysis. The difference, of course, is that author A doesn't mind if the more accurate analysis is aided by a lack of transparency in the market.

Superior, in this case, means better than someone else. It's a comparative term, rather than an absolute term. It's not about one analyst being far better than most others; it's about one analyst benefitting from doing a better job than another, or by doing a better job than they otherwise would have had they not had that inside information.