The strong form of the efficient market hypothesis contends thatA) a select few institutional investors can earn abnormal profits.B) abnormal profits are randomly distributed.C) no one can consistently earn a profit.D) no one can consistently earn abnormal profits.

Question

01-10-2019
Business

contestada

The strong form of the efficient market hypothesis contends thatA) a select few institutional investors can earn abnormal profits.B) abnormal profits are randomly distributed.C) no one can consistently earn a profit.D) no one can consistently earn abnormal profits.

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Nyctalus Nyctalus · Answer 1 · 2019-10-01T06:36:51+02:00

Answer: Option D

Explanation: Strong form efficiency is the most stringent form of market efficiency. This hypothesis states that the securities in the market reflects all the information in their price whether public or private.

Therefore, any investor would not be able to earn abnormal returns no matter how much research he or she has done. As the securities reflects private information also, therefore, insider trading will also be useless.

Hence from the above we can conclude that the correct option is D.