If a market is strong form eﬃciency, it also implies that:
A)semistrong form eﬃciency holds.
B)weak form eﬃciency holds.
C)one cannot earn abnormal returns with inside information.
D)Both A and C.
E)A, B and C.

Question

Quizplus · Accepted Answer

In a strong form efficient market, all information, public and private (inside information), is already reflected in stock prices. This implies that neither technical analysis (which is based on past prices and is related to weak form efficiency) nor fundamental analysis (related to semi-strong form efficiency, which includes all publicly available information) can yield abnormal returns. Therefore, if a market is strong form efficient, it also implies that semi-strong form efficiency and weak form efficiency hold, and one cannot earn abnormal returns with inside information.

If a Market Is Strong Form Eﬃciency, It Also Implies