Sometimes One Observes That the Price of a Company's Stock

question 1

Multiple Choice

Sometimes one observes that the price of a company's stock falls after the announcement of favorable earnings. This phenomenon is

• A)clearly inconsistent with the efficient markets hypothesis.
• B)consistent with the efficient markets hypothesis if the earnings were not as high as anticipated.
• C)consistent with the efficient markets hypothesis if the earnings were not as low as anticipated.
• D)consistent with the efficient markets hypothesis if the favorable earnings were expected.

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Definitions:

Stimulus

Anything that can provoke a response or reaction from a biological organism or a system.

Conscious Awareness

The mental state of being fully engaged and aware of the present moment, including thoughts, feelings, and external environment.

Strongest

The most powerful, forceful, or capable in a particular group, area, or context.

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A psychological theory suggesting that people prefer harmony and consistency in their views of the world and relationships.