The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight, during the peak of the citrus harvest.In an efficient market one would expect the price of Florida Orange's stock to
A)drop immediately.
B)remain unchanged.
C)increase immediately.
D)gradually decline for the next several weeks.
E)gradually increase for the next several weeks.

Question

Quizplus · Accepted Answer

In an efficient market the price of the stock should drop immediately when the bad news is announced.If later news changes the perceived impact to Florida Orange, the price may once again adjust quickly to the new information.A gradual change is a violation of the EMH.

The Weather Report Says That a Devastating and Unexpected Freeze