Which of the following statements is most correct?
A) Semistrong-form market efficiency means that stock prices reflect all public information.
B) An individual who has information about past stock prices should be able to profit from this information in a weak-form efficient market.
C) An individual who has inside information about a publicly traded company should be able to profit from this information in a strong-form efficient market.
D) Statements a and c are correct.
E) All the statements above are correct.

Question

Quizplus · Accepted Answer

Semistrong-form market efficiency means that stock prices reflect all public information, including past prices. Weak-form means that prices reflect past prices but not all publicly available information, and strong-form means that prices reflect all information, including insider information. Choice B is incorrect because weak-form only includes past stock prices, not all public information. Choice C is incorrect because in a strong-form efficient market, even insiders cannot profit from their knowledge as the market has already reflected that information. Choice D and E are incorrect because statement C is incorrect.

Which of the Following Statements Is Most Correct