Question

According to the Efficient Markets Hypothesis, how might access to insider, non-public information give rise to unjust rewards/enrichment through the trading of securities?

(Be sure to explicitly link your answer back to the Efficient Markets Hypothesis.)

Answer 1

there are three forms of market according to efficient market hypothesis and one of them is a semi efficient form of market which advocates that all the publicly available information are already discounted into the share price but all the private informations are not discounted into the share price, so there would always be a scope of management and people related to the management to get an unfair advantage of those private price sensitive information and make gains.

In this case, the access to non public information which is private information is beneficial to generate higher rate of return in semi efficient form of market because those private information have not been discounted into the price. According to semi efficient form of market hypothesis, there would always be a scope for insider trading because private information are not discounted into the price so since it is a private information, hence the persons possessing those private information would be gaining even in efficient market, according to semi efficient form of market hypothesis.