Someone who is using information outside the efficient markets hypothesis:
A) has information about the aging U.S. population and expects stock for companies that cater to senior citizens to increase in value.
B) reads in the newspaper about a merger between two profitable firms and expects the stock prices for these companies to rise.
C) while auditing a dishonest company realizes that its profit estimates are greatly inflated and immediately sells her stock in the company.
D) hears a rumor that a top bank may be in trouble and decides to sell his stock in that company.

Question

Quizplus · Accepted Answer

The efficient markets hypothesis suggests that all available information is already reflected in stock prices. In choice C, the auditor has access to non-public, insider information that is not yet reflected in the stock price, which is outside the efficient markets hypothesis.

Someone Who Is Using Information Outside the Efficient Markets Hypothesis