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 falls resulting in a net increase of only $4.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 choices are complete.

Question

Quizplus · Accepted Answer

CThe initial $8 increase followed by a correction to a $4 net increase suggests an overreaction to the news, aligning with choice A. The eventual price adjustment also indicates that the market has absorbed and reacted to the public information, consistent with the semi-strong form of market efficiency, as described in choice C.

USBancorp Holds a Press Conference to Announce a Positive News