Falcon Technologies (FAL)Ltd Announced at 10:15am on the 4 August

question 32

Essay

Falcon Technologies (FAL)Ltd announced at 10:15am on the 4 August 2006 an increase in EPS of 10% relative to the previous year.The following table shows the share price of FAL and the value of the S&P/ASX 200 index around the time of the announcement.

Using this information answer the following questions:
a) What are the abnormal returns surrounding the earnings announcement of Falcon Technologies?
b) How has the market reacted to the earnings announcement? How can you explain this reaction?
c) Are the abnormal returns generated by FAL around its EPS announcement consistent with the concept of market efficiency? What level of efficiency does this example allow us to comment upon? Explain.

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Definitions:

B Lymphocytes

White blood cells that form part of the immune system and are involved in the production of antibodies to combat infections.

Humoral Immunity

The aspect of immunity that is mediated by antibodies produced by B cells in response to external pathogens.

Specific Antibodies

Immune system proteins tailored to recognize and neutralize specific antigens, such as viruses or bacteria.

Circulating Erythrocytes

Red blood cells that are moving through the bloodstream, carrying oxygen to body tissues and removing carbon dioxide.