The Market's Reaction to the Announcement of a Change in the Firm's

question 201

Multiple Choice

The market's reaction to the announcement of a change in the firm's dividend payout is the:

• A) Information content effect.
• B) Clientele effect.
• C) Efficient Markets Hypothesis.
• D) M&M Proposition I.
• E) M&M Proposition II.

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Definitions:

Law of Small Numbers

A cognitive bias that leads people to draw broad conclusions from small data sets or limited observations.

Affect Heuristic

A mental shortcut that allows people to make decisions and solve problems quickly based on their emotions and feelings.

House Money

Refers to the concept of playing with the profits from previous bets rather than one's own capital.

Irrational Behavior

Actions or decisions that are not based on logical reasoning, sound judgment, or align with standard economic theories or expectations.