Suppose an Efficient Market Has Been Operating with Regard to Stock

question 30

Multiple Choice

Suppose an efficient market has been operating with regard to stock in a particular company and that company announces that its profits were down 50% from the previous period but the stock price rises after getting the news on a day when all of the other stocks are barely moving. This is

• A)absolutely illogical.
• B)at least potentially consistent with the efficient market hypothesis because investors may have been anticipating a 75% drop.
• C)at least potentially consistent with the efficient market hypothesis because investors may have been anticipating a 25% drop.
• D)at least potentially consistent with the efficient market hypothesis because investors may have been anticipating those 50% drop.

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