If a market is strong form efficient then:
A)company insiders are the only investors capable of earning an abnormal profit.
B)abnormal profits are obtainable by any and all investors.
C)technical analysts who study past market performance have a market advantage.
D)all investments should have positive NPVs.
E)company insiders have no advantage over John Q.Public investor.

Question

Quizplus · Accepted Answer

If a market is strong form efficient, all known and unknown information about a stock is already reflected in its price. This means that no investor, including company insiders, can generate abnormal profits by using their access to privileged information. Therefore, company insiders have no advantage over John Q. Public investor, making option E the best answer. Options A, B, C, and D are all incorrect as they imply that some investors can earn abnormal profits, which is not possible in a strong form efficient market.

If a Market Is Strong Form Efficient Then