Dew Drop In,Inc.announces is quarterly dividend will increase from $3.80 to $4.00.After the announcement,the price of Dew Drop In,Inc.'s stock drops.The most likely explanation is that
A) the stock market is a perfect market.
B) investors are irrational.
C) investors were expecting a larger increase.
D) Dew Drop In, Inc.'s debt ratio decreased.

Question

Quizplus · Accepted Answer

The drop in stock price suggests that investors were expecting a larger increase in dividend, causing them to sell off their shares. This implies that the market is not perfectly efficient and that investors have expectations and reactions to news and announcements. There is no information available on Dew Drop In, Inc.'s debt ratio, so option D cannot be the answer. Option B is a possible explanation, but not the most likely one in this case.