Multiple Choice
Which of the following best describes the concept of 'puffery' in relation to fraudulent misrepresentation under the fraud triangle?
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6. Internal Controls and Reporting Cash
Fraud and the Fraud Triangle
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Inside information has the least value when financial markets are:
A
illiquid
B
highly efficient
C
thinly traded
D
volatile
Verified step by step guidance1
Understand the concept of 'inside information' in financial markets. Inside information refers to non-public, material information about a company that could influence its stock price.
Learn about the characteristics of highly efficient markets. In such markets, all publicly available information is quickly and accurately reflected in asset prices, leaving little room for inside information to provide an advantage.
Compare the efficiency of financial markets with other conditions mentioned in the problem, such as illiquid, thinly traded, and volatile markets. These conditions often result in slower dissemination of information, making inside information more valuable.
Recognize that in highly efficient markets, the value of inside information diminishes because prices already reflect all available information, leaving little opportunity for traders to benefit from non-public data.
Conclude that the least value of inside information occurs in highly efficient markets, as the correct answer suggests.
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