The Food and Drug Administration (FDA) just announced yesterday that they would approve a new cancer-fighting drug from Queen. You observe that Queen had an abnormal return of 0% yesterday. This suggests that
A) the market is not efficient.
B) Queen stock will probably rise in value tomorrow.
C) Queen stock will probably fall in value tomorrow.
D) the approval was already anticipated by the market.

Question

Quizplus · Accepted Answer

The abnormal return of 0% suggests that the market had already anticipated the FDA's approval of the new cancer-fighting drug, and thus, the information was already reflected in Queen's stock price prior to the announcement.

The Food and Drug Administration (FDA) Just Announced Yesterday That