Assume that a company announces unexpectedly high earnings in a particular quarter. In an efficient market one might expect ________.
A) an abnormal price change immediately after the announcement
B) an abnormal price increase before the announcement
C) an abnormal price decrease after the announcement
D) no abnormal price change before or after the announcement

Question

Quizplus · Accepted Answer

In an efficient market, all publicly available information is reflected in the stock price. Therefore, when unexpected earnings are announced, the stock price should adjust immediately to reflect this new information, resulting in an abnormal price change.

Assume That a Company Announces Unexpectedly High Earnings in a Particular