A senior manager can consistently earn excess profits by trading her company's stock.Which form of efficiency is contradicted?

Question

Quizplus · Accepted Answer

The strong form of efficiency is contradicted because it asserts that all information, both public and private, is reflected in securities prices. If a senior manager consistently earns excess profits through trading her company's stock, it suggests that she may have access to private information that is not reflected in the stock price, thereby contradicting the strong form of efficiency. The weak form of efficiency only considers past stock prices, and the semi-strong form of efficiency includes public information such as financial statements and news releases.

A Senior Manager Can Consistently Earn Excess Profits by Trading