Question

3. If I hear that a DELTA Airlines plane crashed on the radio, and I am able to sell my DELTA stock before the price falls, it would be a violation of ______________ market efficiency. Group of answer choices a. weak form b. semi-strong form c. strong form d. ultimate form

4. The form of market efficiency that says that you cannot use inside information to gain abnormal returns is______________________.

Group of answer choices

a. weak form

b. semi-strong form

c. strong form

d. ultimate form

Answer 1

1)

When the news of Delta airlines hits the public, according to semi strong form of efficiency all public information need to be captured in the current stock price. Hence it is a violation of semi strong form of market efficiency.

Answer is b. semi-strong form

2)

In strong form of market efficiency, no amount of information whether past prices, public or private is a prerogative of outperforming the market as all this information is captured in the market prices. So Strong form of market efficiency advocates that one cannot earn abnormal returns by using inside or private information.

Answer is c. strong form