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.
A)weak
B)semistrong
C)semiweak
D)strong
E)perfect

Question

Quizplus · Accepted Answer

Based on the information provided, your friend is using insider information to trade Delta stock, which is not known to the general public. This suggests that the financial markets are not perfectly efficient (E), and may not even be strong (D) or semi-strong (C) form efficient, as these forms assume that all publicly available information is already reflected in stock prices. However, it is possible that some information, such as insider information, is not yet reflected in the stock prices, suggesting that the markets are at best semi-strong form efficient (B). Weak form efficiency (A) applies to the case where historical prices do not predict future prices.

Your Best Friend Works in the Finance Office of the Delta