If the financial markets were regulated such that the markets maintained strong form efficiency, then:
A)insider trading laws would be unnecessary.
B)all investors would earn equivalent rates of return.
C)risk premiums would vanish.
D)all investors would become arbitrage traders.
E)securities would tend to be continually underpriced.

Question

Quizplus · Accepted Answer

Strong form efficiency implies that all information, including insider information, is already reflected in the current market prices. Therefore, insider trading laws would be unnecessary as there would be no advantage gained by having insider information. However, it does not guarantee that all investors would earn equivalent rates of return, that risk premiums would vanish, or that all investors would become arbitrage traders. Securities could still be overpriced or underpriced at any given time.

If the Financial Markets Were Regulated Such That the Markets