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Net Net: Promoting innovation and managing change

Secret Polls May Be Driving Greek Bank Stock Surge

Jorg Greuel | Getty Images

Secret polling numbers may be driving Greek banks stocks straight up.

Greek banking stocks surged 20 percent Thursday "amid market talk that secret opinion polls were showing that a government favorable to the international bailout agreement was likely to emerge after the June 17 election," Reuters reports.

Right now, it is illegal in Greece to publish electoral polls prior to the election. But it is not illegal to take polls without publishing them. In fact, Greek political parties and media organizations constantly poll the electorate during the two-week "quiet period" before the election, according to sources familiar with the matter.

What's new this year is that hedge funds are also conducting polls. At least two funds have been conducting polls of Greeks, according to my reporting. Most likely, the real number of private polls is much higher.

As I pointed out on June 1, the day the ban kicked in, this creates a huge opportunity for informational arbitrage. Traders who obtain data about the likely outcome of the Greek election can position themselves to profit. This trading, however, will quickly eat into the arbitrage opportunity because other traders will notice the price movements and surmise what the well-informed traders know.

The ban on polls will keep most of us largely in the dark about the shifts in electoral sentiment over the next two weeks. But investors could take advantage of this darkness by commissioning their own polls to shine a light into the shadow. The Greek ban on polls may have the unintended consequence of rewarding traders with nonpublic information.

I’m fairly certain that at least some hedge funds are already planning on commissioning polls. When they do, it may be possible to catch a glimpse of their information by watching shifts in financial markets.

If we see a decline in asset prices expected to fall if the anti-bailout forces win, for example, we can surmise that traders with an informational edge are selling.

This surge in Greek bank stocks appears to be conveying the information gleaned from the non-public polls: the Greek centrists are surging.

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