What does the strong form of market efficiency imply about information reflected in prices?

The strong form of market efficiency suggests that all available information—both public and private—is fully reflected in stock prices. This means that not only is information accessible to the general public, such as financial statements and market news, considered by investors, but also insider information that is not publicly available.

Under this framework, no investor can achieve excess returns consistently because all relevant information is already incorporated into the stock prices. Therefore, even those with private or non-public information would not be able to realize an advantage, as the prices have adjusted to reflect all types of information, ensuring that no excess returns can be attained on a risk-adjusted basis. This understanding reinforces the concept of market efficiency in the strongest sense, where information asymmetry is eliminated.

In contrast, the other options present a limited view of what information influences prices. Some only acknowledge public information or private information and do not encompass the comprehensive nature of the strong form efficiency. Those interpretations fall short of recognizing the complete integration of all available information, which is a fundamental aspect of the strong form.