what is Mosaic Theory

The Mosaic Theory is a method used by security analysts to evaluate a company's securities by gathering a wide range of information, including public, non-public, material, and non-material data. This approach is distinct from insider trading, which involves the use of confidential, non-public material information. The mosaic theory is considered a valid method by the CFA Institute and has been recognized in legal contexts, such as the Dirks v. SEC case. However, it requires analysts to carefully assess the information used to avoid legal issues related to insider trading. The mosaic theory relies on the integration of seemingly unrelated pieces of information to form a comprehensive analysis, which can be enhanced by advancements in technology. Investors can apply the mosaic theory by collecting insights from various sources, such as financial reports, social networks, and industry professionals, to develop a more informed perspective on a stock or market.