Company insiders of XYZ consistently purchase shares of their company prior to increases in the share price and sell shares before decreases in the share price.Which of the following answers is consistent with the aforementioned observation?

Question

Quizplus · Accepted Answer

If company insiders consistently purchase and sell shares ahead of price increases and decreases, respectively, it suggests that they have access to non-public information that is not immediately reflected in market prices. This would imply that the market is not strong-form efficient, as even insiders are able to earn abnormal returns. However, it is possible that the market is weak-form or semi-strong form efficient to some degree.

Company Insiders of XYZ Consistently Purchase Shares of Their Company