Insider information and Market efficiency

In a semi-strong efficient market, the share prices reflect all publicly available information about the company. This includes information that is disclosed by the company through public announcements, financial reports, press releases, and other sources. Managers and other insiders are legally obligated to disclose any material information that could potentially impact the company's financial position. This information is then disseminated to the market, allowing investors to make informed decisions based on the available information. It is important to note that insider dealing, which involves trading based on non-public information, is illegal and not permissible in a semi-strong efficient market. The market relies on the timely and accurate disclosure of information by managers and insiders to maintain its efficiency.

In a strong-form efficient market, the share prices already reflect all information, both published and unpublished, that is relevant to the company. This means that investors in a strong-form efficient market would have access to all insider information about the financial position of the company. However, it is important to note that insider dealing, which involves trading based on non-public information, is illegal. Therefore, the market being strong-form efficient does not mean that insider dealing is allowed or encouraged. Instead , it means that all relevant information is already incorporated into the share prices, making it difficult for investors to consistently earn abnormal returns by using insider information.

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