Question

The U.S. Securities and Exchange Commission periodically charges individuals with insider trading and claims those individuals have made unfair profits. Given this, you would be most apt to argue that the markets are less than _____ form efficient.
a. Weak
b. Semi weak
c. Semi strong
d. Strong
e. Perfect

Answer 1

Answer: The correct answer is "d. Strong".

Explanation: Given this, you would be most apt to argue that the markets are less than STRONG form efficient.

Efficiency in any type of financial market is necessary for proper price formation.

For a market to be efficient, two premises must be given:

Market information must be available at no cost to the investor.

The relevant information is reflected in the share price, bond, currency or interest rate.

And in a theoretically efficient market nobody can constantly get excessive returns in the market.

In cases where privileged information is handled, it is used to obtain excessive profits, therefore it could be said that the markets are less than strong form efficient.