Which of the following statements about the strong form of market efficiency is not correct?
A) Security prices fully reflect all information, including that which is not publicly available.
B) Investors are able to participate in 'insider trading'.
C) Investors are unable to earn abnormal returns through private information.
D) Capital markets are not considered to be efficient in the strong form.

Question

Quizplus · Accepted Answer

The strong form of market efficiency assumes that all information, including private information, is reflected in security prices. Therefore, insider trading is not possible and investors cannot earn abnormal returns by using private information. Choice B is incorrect because the strong form of market efficiency specifically prohibits insider trading.

Which of the Following Statements About the Strong Form of Market