Which one of the following statements related to unexpected returns is correct?
A) All announcements by a firm affect that firm's unexpected returns.
B) Unexpected returns over time have a negative effect on the total return of a firm.
C) Unexpected returns are relatively predictable in the short-term.
D) Unexpected returns generally cause the actual return to vary significantly from the expected return over the long-term.
E) Unexpected returns can be either positive or negative in the short term but tend to be zero over the long-term.

Question

Quizplus · Accepted Answer

Unexpected returns are random and can be positive or negative in the short term, but over the long term, they tend to average out to zero, as they are deviations from the expected return.

Which One of the Following Statements Related to Unexpected Returns