Question

Question text The market is strong-form inefficient when Select one: A.Any party in possession of value-relevant...

Question text
The market is strong-form inefficient when
Select one:
A.Any party in possession of value-relevant information can benefit from the information before the firm releases it to the public.   
B.Prices do not move before the public announcement of the value-relevant information.
C.Only key personnels (such as CEOs, members of the board, etc.) of a firm can benefit from value-relevant information before the firm releases it to the public.
D.Prices only move after the public announcement of the value-relevant information.

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Homework Answers

Answer #1

A. CORRECT

REASON :

STRONG FORM OF INEFFICIENCY :

Characterised by : 1. STOCK PRICE DOES NOT REFLECT ALL INFORMATION WHETHER PUBLIC OR PRIVATE

2. INVESTORS CAN OUT-PERFORM MARKET IF THEY HAVE RELEVANT INFORMATION THAT IS NOT YET RELEASED .

B AND D. INCORRECT

REASON : PRICE MOVING AFTER PUBLIC ANNOUNCEMENT IS A SIGN OF SEMI- STRONG EFFICIENCY.

  

C. INCORRECT

REASON : IF RELEVANT INFORMATION IS AVAILABLE , IT CAN BE UTILIZED TO EXPLOIT INEFFICIENT MARKET BY ANY INVESTOR REGARDLESS OF THEM BEING INSIDERS OR NOT. CASES ARE KNOWN WHERE INSIDERS HAVE SOLD INSIDER INFORMATION TO INVESTORS.

  

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