CFA Practice Question

There are 275 practice questions for this study session.

CFA Practice Question

A lawyer works for a firm that advises corporate firms planning to sue other corporations for antitrust damages. He finds that he can "beat the market" by short selling the stock of the firm that will be sued. This finding is in violation of the principle of ______.

A. weak-form market efficiency
B. semi-strong-form market efficiency
C. strong-form market efficiency
Correct Answer: C

User Contributed Comments 7

User Comment
katybo I would say this is not private info it's privilege, so you are not violating the strong form of market efficiency...
tssverma I think private information is insider infomation. So it supports the Strong form of efficiency. The question asks voilation .So I thought C should be correct.
MUTE I think the ans shld be becuase, strong form EMH say prices reflects all public and private info about security. While Semistrong-Form is only public info. Lawyer's trade is on Insider's info.
o123 he will beat the market...so its in violations of SfME
danrow it is a violation of strong EMH because he is trading on (and getting an abnormal return) insider information (non public material information) which is private information as well.
eb2568 I doubt he will care too much about beating the market when he's sitting in his 8x10 cell after trying to make a quick buck.
khalifa92 information was announced ? no ? its private.
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