How Do Stock Prices Act as a Signal for the Future

question 213

Multiple Choice

How do stock prices act as a signal for the future value of the firm?

• A) If firms merge, stock prices could rise indicating that the merger can result in greater profitability.
• B) If stock prices rise, they could be indicating future profitability for the firm.
• C) If stock prices fall, they could be indicating declining economic conditions.
• D) All of these possibilities are correct.

---

Definitions:

Passivity

The tendency to be inactive or submissive, without taking action or making decisions independently.

Major Depressive Disorder

A mental disorder characterized by persistently depressed mood or loss of interest in activities, causing significant impairment in daily life.

Social Skills Training

A form of therapy or education that teaches individuals how to interact effectively and appropriately in social situations.

Relaxation Training

Techniques designed to reduce stress and anxiety by promoting physical and mental calmness.