Shareholders discount many corporate announcements because of their prior expectations. If an announcement causes the price to change it will mostly be driven by:
A) the expected part of the announcement.
B) market inefficiency.
C) the innovation or unexpected part of the announcement.
D) the systematic risk.

Question

Quizplus · Accepted Answer

The price change following a corporate announcement is primarily driven by the innovation or unexpected part of the announcement, as this information was not previously factored into the stock's price. Expected information is typically already priced in by the market.

Shareholders Discount Many Corporate Announcements Because of Their Prior Expectations