There is evidence to support the contention that company insiders
A) cannot earn abnormal profits because they are not permitted to trade shares in their company's stock without a one-month advance notice to the SEC.
B) can profit in a manner that counters the strong form of the efficient market hypothesis.
C) generally earn a profit equal to that of public investors.
D) have no distinct advantage when trading shares of their company's stock.

Question

Quizplus · Accepted Answer

Insiders can profit from non-public information, which contradicts the strong form of the efficient market hypothesis. This form asserts that all information, public and private, is already reflected in stock prices, and thus no one can consistently achieve higher returns. However, insiders, by virtue of their access to non-public information, can indeed make trades that outperform the market, challenging this hypothesis.

There Is Evidence to Support the Contention That Company Insiders