Studies of Negative Earnings Surprises Have Shown That There Is

question 3

Multiple Choice

Studies of negative earnings surprises have shown that there is

• A)a negative abnormal return on the day negative earnings surprises are announced.
• B)a positive drift in the stock price on the days following the earnings surprise announcement.
• C)a negative drift in the stock price on the days following the earnings surprise announcement.
• D)both A and B are true.
• E)both A and C are true.

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Definitions:

Positive Correlation

A relationship between two variables where they move in the same direction, meaning when one variable increases, the other also increases, and vice versa.

Slope

In mathematics, the measure of the steepness or incline of a line, often calculated as the ratio between the change in the y-value to the change in the x-value.

Horizontal Line

In geometry and graphing, a straight line that runs left to right (parallel to the x-axis) and has a slope of zero, indicating no change in the y-value across different points on the line.

Upward-sloping Line

A graphical representation often used to show a positive relationship between two variables on a graph, indicating that as one variable increases, the other does as well.