In November 2005, traders on the ground sold off a significant amount of Nike's shares while Nike's CEO was flying aboard the company's Gulfstream jet.The jet was malfunctioning and traders were watching television coverage of the event.This scenario illustrates which principle?
A)Market prices reflect information
B)Individuals respond to incentives
C)Cash flows are the source of value
D)The time value of money

Question

Quizplus · Accepted Answer

This scenario illustrates the principle that market prices reflect information. Traders on the ground were watching television coverage of the malfunctioning Gulfstream jet, which influenced them to sell off Nike's shares. This demonstrates how market participants respond to new information and adjust their behaviors accordingly, ultimately impacting market prices.

In November 2005, Traders on the Ground Sold Off a Significant