If One Firm in a Given Industry Declares Bankruptcy, the Market

question 9

Multiple Choice

If one firm in a given industry declares bankruptcy, the market may lower the values of other firms in a given industry because the reveals new, negative information about the status of the industry as a whole.This phenomenon is called:

• A)the contagion effect.
• B)the intra-industry wealth transfer effect.
• C)irrational behavior.
• D)the sympathy effect.

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