In the first calendar quarter a company issues a surprising report saying that it expects profits to rise in the fourth quarter. The theory of efficient markets says we should expect the price of the company's stock to:
A) rise in the fourth quarter when the higher profits are actually seen.
B) fall immediately as stockholders will be disappointed about having to wait until the fourth quarter for higher profits.
C) rise immediately on the expectation of higher profits in the future.
D) rise around the third quarter since this information will take time to disseminate.
Correct Answer:
Verified
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