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Explainer: Did investors profit from Hamas attack on Israel?

The Tel Aviv Stock Exchange said there was no irregular trading after US researchers noted an increase in short volume and interest of some Israeli securities in the days leading up to Hamas’ deadly incursion.
An Israeli flag reading "together we win" is reflected in a bus passing in front of a demonstration held by Israeli left-wing activists near the Ministry of Defence in Tel Aviv on December 5, 2023, calling for a ceasefire and exchange of hostages amid ongoing battles between Israel and Hamas. (Photo by AHMAD GHARABLI / AFP) (Photo by AHMAD GHARABLI/AFP via Getty Images)

Two US researchers released a report on Monday suggesting that some investors knew of Hamas’ Oct. 7 attack on Israel ahead of time and profited from Israeli securities as a result. On Tuesday, Israel’s stock exchange head denied any irregularities.

What happened: Law professors Robert Jackson Jr. of New York University and Joshua Mitts of Columbia University published a report titled “Trading on Terror?” In the report, the two wrote that short interest in the MSCI Israel Exchange Traded Fund “suddenly, and significantly, spiked” on Oct. 2, and that short sales on the Tel Aviv Stock Exchange “increased dramatically” before the attack. The report cited data from the Financial Industry Regulatory Authority, a private American firm that regulates markets.

A short refers to speculation that the price of a security will decline. Exchange-traded funds, or ETFs, track particular indexes and sectors. The MSCI ETF is incorporated in the United States and corresponds to the performance of the MSCI Israel Capped Investable Market Index, an index that tracks investment results of a range of Israeli equities, according to Bloomberg.

The short transaction volume for the MSCI ETF skyrocketed from a few thousand in September to more than 200,000 on Oct. 2, according to the report.

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