Question

Galleon Group, a hedge fund managing $7 billion in assets was consistently outperforming the market. The reason for success was that the manager of Galleon took advantage of the insider information leakages from former MBA classmates. Later the manager of Galleon was found guilty of insider trading and was sentenced for eleven years in prison. The fact that Galleon was consistently outperforming the market implies that:

a) Market is not efficient in the weak form

b) Market is not efficient in the semi-strong form

c) Market is not efficient in the strong form

Answer 1

Strong form efficiency is the strongest version of market efficiency and states that all information in a market, whether public or private, is accounted for in a stock's price.This degree of market efficiency implies that profits exceeding normal returns cannot be made, regardless of the amount of research or information investors have access to. But when the reach of information exceeds the outline range by means of unfair practice then it doesn't makes the market scenario effecient in a strong form.