Information Asymmetry & Insider Risk

Overview

This pillar identifies markets where a small group of participants may hold decisive, private information. It helps you gauge the risk that public data and analysis are insufficient to predict the outcome.

What It Does

It analyzes the structure of a market's information environment, contrasting the availability of public data with the potential for private knowledge. The pillar scores the probability that insider activity is driving price movements. This acts as a crucial risk overlay for any trading strategy.

Why It Matters

It protects you from playing on an uneven field, highlighting markets where fundamental analysis can be easily overturned by a single, non-public piece of information. Understanding this asymmetry is key to avoiding bad positions and identifying structurally unsound markets.

How It Works

First, the pillar quantifies the amount of available public information from news and official sources. Second, it identifies potential insider groups and analyzes trading volume for anomalies, such as spikes without a corresponding public catalyst. Finally, it combines these factors into a single risk score, flagging markets with high information asymmetry.

Methodology

The pillar calculates an Information Asymmetry Score (IAS) on a 0-100 scale. The IAS is a weighted average of three components: Information Scarcity (1/log(news articles + official reports in last 7 days)), Insider Potential (a qualitative score based on market type), and Anomalous Volume (periods where volume exceeds 2.5 standard deviations of the 30-day moving average without a public news trigger).

Edge & Advantage

This pillar provides an edge by focusing on market structure, not just the event itself, allowing you to sidestep markets where your analysis is likely to be irrelevant.

Key Indicators

• Anomalous Volume

  high

  Significant spikes in trading activity that cannot be explained by public news or events.

• Information Scarcity Score

  high

  A measure of how little reliable public information exists for a market, increasing the value of private data.

• Insider Potential

  medium

  Qualitative assessment of how many individuals or small groups could possess decisive, non-public information.

Data Sources

• Exchange Trading Data

  Provides the raw price and volume data needed to detect anomalous activity.

• Global News APIs (e.g., GDELT)

  Used to quantify the volume of public information and correlate it with market activity.

• Regulatory Filings (e.g., SEC EDGAR)

  Source for official, public information in corporate and financial markets.

Example Questions This Pillar Answers

• → Will SpaceX conduct a full stack orbital launch of Starship by the end of the month?
• → Will the FDA approve a specific new drug by its deadline?
• → Will Amazon acquire a specific company by the end of the year?

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