In an efficient market, daily abnormal returns:
A)are very volatile.
B)reflect news within the past week.
C)reflect news since the prior trading day.
D)remain constant.
E)do not exist.

Question

Quizplus · Accepted Answer

In an efficient market, daily abnormal returns reflect all news and information that has been released since the prior trading day, meaning that choice C is the correct answer. This is because an efficient market is one where all available information is quickly and accurately reflected in stock prices, so any news that is released between trading days will be reflected in the next day's abnormal returns. Choices A, B, D, and E are incorrect because an efficient market is not volatile, abnormal returns do not reflect only recent news, abnormal returns are not constant, and abnormal returns do exist in a well-functioning market.

In an Efficient Market, Daily Abnormal Returns