A lawyer works for a firm that advises corporate firms planning to sue other corporations for antitrust damages.He finds that he can "beat the market" by short-selling the shares of the firm that will be sued.This finding is a violation of the:

Question

Quizplus · Accepted Answer

The strong form of the efficient market hypothesis states that all information, both public and private, is reflected in current stock prices. If the lawyer's finding is correct and he can consistently profit from it, then it implies that he has access to private information that is not reflected in the stock price. Therefore, his actions violate the strong form of the efficient market hypothesis.

A Lawyer Works for a Firm That Advises Corporate Firms