U.S.Bancorp holds a press conference to announce a positive news event that was unexpected to the market.As soon as the announcement is made,the stock price increases $8 per share but then over the next hour the price continues to increase resulting in a total increase of $11.Given this information which of the following statements is correct?
A)This is an example of a market overreaction.
B)This is an example of a market underreaction.
C)This is an example of a semi-strong efficient market.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

The initial $8 increase followed by a continued rise suggests that the market initially underreacted to the news, as the full impact was not immediately reflected in the stock price.

USBancorp Holds a Press Conference to Announce a Positive News