Your best friend works in the finance office of the Delta Corporation. You are aware that this friend trades Delta stock based on information he overhears in the office. You know that this information is not known to the general public. Your friend continually brags to you about the profits he earns trading Delta stock. Based on this information,you would tend to argue that the financial markets are at best _____ form efficient.

Question

Quizplus · Accepted Answer

The fact that the friend is able to make profits trading Delta stock based on information not known to the general public suggests that the market is not semistrong form efficient, which implies that all publicly available information is reflected in stock prices. The friend's ability to profit implies that there is private information on which he is trading, hence the market is at best semistrong form efficient.

Your Best Friend Works in the Finance Office of the Delta