Evidence that stock prices sometimes fall when a firm announces good news contradicts the efficient market hypothesis.

Question

Quizplus · Accepted Answer

The efficient market hypothesis (EMH) suggests that all available information is already reflected in stock prices. Therefore, if a firm announces good news that was already anticipated by the market, the stock price may not rise, and could even fall if the news was not as good as expected. This does not contradict the EMH, as it demonstrates the market's efficiency in incorporating expectations into prices.

Evidence That Stock Prices Sometimes Fall When a Firm Announces