A lawyer works for a firm that advises corporate firms planning to sue other corporations for antitrust damages.He finds that he can "beat the market" by short-selling the stock of the firm that will be sued.This finding is a violation of the:

Question

Quizplus · Accepted Answer

The strong form of the efficient market hypothesis suggests that all public and private information is already reflected in stock prices, meaning that no individual can consistently earn abnormal returns by trading on private information. In this case, the lawyer's ability to "beat the market" by short-selling the stock of the firm that will be sued indicates that he has access to private information, which violates the strong form of the efficient market hypothesis.

A Lawyer Works for a Firm That Advises Corporate Firms