Nicholas Manufacturing just announced yesterday that its fourth quarter earnings will be 10% higher than last year's fourth quarter.You observe that Nicholas had an abnormal return of -1.2% yesterday.This suggests that
A)the market is not efficient.
B)Nicholas' stock will probably rise in value tomorrow.
C)investors expected the earnings increase to be larger than what was actually announced.
D)investors expected the earnings increase to be smaller than what was actually announced.
E)earnings are expected to decrease next quarter.

Question

Quizplus · Accepted Answer

The abnormal return of -1.2% suggests that investors expected the earnings increase to be larger than what was actually announced. This could indicate disappointment or a misinterpretation of the information, leading to a decrease in the stock price.

Nicholas Manufacturing Just Announced Yesterday That Its Fourth Quarter Earnings