When a Firm Makes an Earnings Announcement That Is Different

question 45

Multiple Choice

When a firm makes an earnings announcement that is different than what the analysts expected the market price of the firm's stock adjusts immediately.This is evidence consistent with markets being ____ efficient but not ____ efficient.

• A) weak-form;strong-form
• B) weak-form;semistrong-form
• C) strong-form;semistrong-form
• D) semistrong-form;strong-form

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Definitions:

Constructive Fraud

Deception or misrepresentation made without the intent to deceive, usually due to neglect or failure to fulfill a duty, which causes harm to another party.

Grossly Negligent

A severe lack of care or the extreme departure from the care a reasonable person would exercise in a similar situation, often resulting in harm or damage.

Actual Fraud

Deliberate deception by one party to secure unfair or unlawful gain, or to deprive another party of a legal right.

Ultramares Rule

A legal principle that limits the liability of accountants for negligence to parties with whom they are in direct contractual relationship unless fraud is involved.