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 posits that all information, both public and private (or insider information), is already reflected in stock prices. Therefore, no one can consistently achieve higher returns. The lawyer's ability to profit from non-public, insider information about impending lawsuits violates this form, as it suggests he can gain an advantage not reflected in the current stock prices.

A Lawyer Works for a Firm That Advises Corporate Firms