Which of the following statements is correct?
A)If the market is strong-form efficient it must also be weak-form efficient and semi-strong efficient.
B)There is evidence to suggest that the market is strong-form efficient because corporate insiders have made extraordinary profits by trading on inside information.
C)The Efficient Market Hypothesis states that security prices will be based on their expected return.
D)None of these statements are correct.

Question

Quizplus · Accepted Answer

If the market is strong-form efficient, it means that all information, including insider information, is already reflected in stock prices. Therefore, the market must also be weak-form efficient and semi-strong efficient.

Option B is incorrect because if insiders were making extraordinary profits, it would contradict the idea of a strong-form efficient market.

Option C is incorrect because the Efficient Market Hypothesis states that security prices will reflect all available information, not just their expected return.

Therefore, the only correct statement is option A.

Which of the Following Statements Is Correct