You are aware that your neighbor trades stocks based on confidential information he overhears at his workplace. This information is not available to the general public. This neighbor continually brags to you about the profits he earns on these trades. Given this, you would tend to argue that the financial markets are at best ________ form efficient.

Question

Quizplus · Accepted Answer

This neighbor's ability to consistently make profits based on confidential information not available to the general public suggests that the financial markets are not semistrong form efficient. Semistrong form efficiency assumes that all publicly available information is reflected in the prices of securities, but this neighbor's profits demonstrate that private information can still be used to gain an advantage.

You Are Aware That Your Neighbor Trades Stocks Based on Confidential