MARIA'S BIG MOUTH
By PAUL THARP
May 16, 2002 --
Wall Street insiders may have capitalized on
the stock picks of CNBC's Maria "Money
Honey" Bartiromo before the public even
heard them on the air, says a new study.
Stocks mentioned by the popular TV
personality usually made big swings
following her comments - but the real trading
in the shares started at least 10 minutes
before she uttered the names on the air, says the study by two professors.
And trading in the shares jumped to a hectic pace in the five minutes just
before Bartiromo's picks. The study suggested that traders with non-public
information on the shares were setting up positions so they were ready to
trade when the picks were finally aired.
When Bartiromo's picks were disclosed, traders appeared to dump their
shares to suckers eager to buy into the news of the picks - reaping instant
profits of typically 61 basis points, the study's co-authors said.
The two finance professors at Emory University's business school who
did the study - Dr. Jeffrey Busse and Dr. Clifton Green - said they
suspected insider trading, but doubted Bartiromo was knowingly involved.
"We were always wondering what caused the activity before the reports
were aired," said Busse.
"It's got to be some insider activity, but we didn't think it would be anyone
at CNBC because if they were to do that, it would jeopardize their careers.
"We always speculated someone she was getting information from realized
that she was about to mention a company on the air. Of all the people she
talked to, maybe a fraction of them traded on that information."
The co-authors think traders were able to figure out what Bartiromo was
going to say on the air.
"It was pretty well known on Wall Street that if you got a call from her
about a stock, it was probably going to be mentioned by her," Busse said.
CNBC said no one at CNBC would have been involved in improper trading
activity.
"CNBC has the highest journalistic standards in the business. Maria
Bartiromo has the utmost integrity, and any allegations or suggestions
otherwise are completely without merit," said Bruno Cohen, executive vice
president of business news.
Cohen said the unusual activity could have been "a coincidence" caused by
mid-day strategy meetings of brokerages and their resulting sales activity.
Flamboyant ex-hedge fund manger Jim Cramer admitted in an interview
with The New York Times on Monday that he often talked to Bartiromo
and sometimes was able glean information from her to trade on. Cramer
later vehemently denied he made those remarks.
The profits on Bartiromo's picks depended on when those with advance
knowledge got into the stock and when they got out, said Busse.
"Typically, the stocks would rise 41 basis points in the first minute after
she mentioned them. So if you bought your position five minutes before
she went on the air, you gained an additional 14 basis points," said Busse.
"If you bought 10 minutes before she aired, it was worth an additional 21
basis points," said Busse.
"If you got in early, you wouldn't have to worry about all the other trading
orders that would get in your way after she mentions it," he said.
He said the sudden uptick in trading five minutes before airtime was
"unusual."
"It suggested that some insider was responding before it's actually on the
air."
The study was based on 20 weeks of Bartiromo's reports on 322 stocks
during the bull market in mid-2000. It will be published in the forthcoming
issue of the Journal of Financial Economics. |
