Strong-form efficiency — Accounting glossary

If strong-form efficiency held fully, even people with private information could not consistently earn abnormal risk-adjusted returns from that information. It includes the information sets in weak and semi-strong efficiency. This is a demanding theoretical benchmark and does not legalise trading on inside information or describe every real market. The existence of legal restrictions and information advantages must be considered separately. A market can incorporate public information quickly while failing the strong-form condition because some private information is not yet in prices.

Worked example

If an executive privately knows of an unannounced acquisition, strong-form efficiency would imply that this knowledge offers no consistent abnormal-return advantage. Actual legal duties concerning inside information apply regardless of whether a market-efficiency theory predicts an advantage.

Common mistake

Using an efficiency theory as a justification for unlawful disclosure or trading, or assuming semi-strong efficiency proves strong-form efficiency.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	AFM	Supporting	September 2026–June 2027
ACCA	FM	Direct	September 2026–June 2027