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 choices are correct.

Question

Quizplus · Accepted Answer

Strong-form efficiency implies that all information, public and private, is already reflected in stock prices. Therefore, if a market is strong-form efficient, it must also be weak-form efficient (all past trading information is reflected in stock prices) and semi-strong efficient (all publicly available information is reflected in stock prices).

Which of the Following Statements Is Correct