Looking for Fingerprints Left in the Data

Michael Giberson

Ray Fisman writes in Slate about recent research showing stock price movements before CIA-sponsored political coups that suggest insiders in the intelligence community were trading on classified information:

A recent study by economists Arindrajit Dube, Ethan Kaplan, and Suresh Naidu argues that those in on the planning process also profited handsomely. By tracking the stock prices of UFC and other politically vulnerable firms in the months leading up to CIA-staged coups in Guatemala, Chile, Cuba, and Iran, the researchers provide evidence that someone–perhaps one of the Dulleses, Cabots, or others in the know–was trading stocks based on classified information of these coups-in-the-making.

This exposé is a contribution to the rapidly expanding field of “forensic economics,” which tries to understand the who, what, and why of illicit transactions. Since these are activities that take place out of sight (at least when they’re done right), researchers are forced to look for fingerprints left in the data by smugglers, bribe-taking politicians, and other lawbreakers.

Fisman himself is a prominent practitioner in the field of forensic economics, co-author of the book Economic Gangsters which examines the use of economic analysis to diagnose the effects of corruption and violence on development. And if the Slate article is a reliable indicator, he writes pretty well for an economist.