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:

Discretionary Income

The amount of an individual's income left for spending, investing, or saving after all taxes and necessities have been paid.

Luxury Items

High-end products or services that are not essential but are desired for their quality, status, and aesthetic appeal, often associated with a higher price.

Voyage

A long journey involving travel, especially by sea or in space.

Applied Science

A discipline that applies existing scientific knowledge to develop more practical applications, including technology or inventions, within fields such as engineering and medicine.