Question

“High-level managers make superior returns on investments in their company’s stock, hence a violation of weak form efficiency”. Discuss this statement.

Answer 1

The statement that “High-level managers make superior returns on investments in their company’s stock, hence a violation of weak form efficiency” is not true in my opinion.

High-level manager of the company are the top management which takes strategic decisions for the company. The high-level manager may have private information about the company and its business prospects so they make superior returns on investments in their company’s stock based on that information. But this ability of making profit does not violate weak-form efficiency. As we can make out that these superior returns are not derived from an analysis of past information like historical stock prices or any other kind of data analysis.