If an announcement by a firm causes the price of that firm's stock to suddenly change,that price change will most likely be driven by:
A)the expected part of the announcement.
B)market inefficiency.
C)the unexpected part of the announcement.
D)systematic risk.
E)expectations of a revised announcement in the near term.

Question

Quizplus · Accepted Answer

The sudden change in stock price indicates that the market was surprised by an unexpected part of the announcement. The expected part of the announcement should already be priced in, and market efficiency would suggest that the current price reflects all available information. Systematic risk and expectations of a revised announcement may contribute to the stock price movement, but they are unlikely to be the primary drivers.

If an Announcement by a Firm Causes the Price of That