Which of the following observations would provide evidence against the strong form of efficient market theory?
I.Mutual fund managers do not on average make superior returns.
II.In any year approximately 50% of all pension funds outperform the market.
III.Managers who trade in their own firm's stocks make superior returns.
A)I only
B)II only
C)III only
D)I and II only

Question

Quizplus · Accepted Answer

The strong form of efficient market theory posits that all information, public and private (insider information), is already reflected in stock prices. Therefore, if managers trading in their own firm's stocks consistently make superior returns, it suggests they are exploiting insider information, which contradicts the strong form of efficient market theory.

Which of the Following Observations Would Provide Evidence Against the Strong