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.

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