Driving in your car, you hear that Microsoft has announced that they have cornered the market on Internet technology. Knowing this is great news for Microsoft, when you arrive at a phone 30 minutes later you call your broker and are able to buy Microsoft stock before its price moves up on the news. This is a violation of ___________ market efficiency.
A) weak form
B) semi-weak form
C) semi-strong form
D) strong form
E) TSX stock

Question

Quizplus · Accepted Answer

This scenario violates semi-strong form market efficiency, which posits that all publicly available information is already reflected in stock prices. Since the individual was able to trade and potentially profit based on public news before it was reflected in the stock price, it indicates that the market is not semi-strong efficient.

Driving in Your Car, You Hear That Microsoft Has Announced