Investing in stocks purchased by insiders may generate superior investment results and that is inconsistent with the strong form of the efficient market hypothesis.

Question

Quizplus · Accepted Answer

The strong form of the efficient market hypothesis posits that all information, public and private (including insider information), is already reflected in stock prices, meaning no one can consistently achieve higher returns. If investing in stocks based on insider purchases leads to superior results, it contradicts this hypothesis by suggesting that not all information is reflected in current stock prices.

Investing in Stocks Purchased by Insiders May Generate Superior Investment