Busıness Fınance I Deneme Sınavı Sorusu #859968
The earnings of a company for the first quarter of the year fell by 40%, however, the stock price did not change after the announcement. The general market was also flat during this period.
Which of the following best explain the situation above?
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The price didn’t change because the market was stable. |
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The news were already priced in. |
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Interest rates in the banks have increased. |
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The firm beta equals to one |
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The market was surprised by the announcement. |
Strong form of the EMH states that all privately and publicly available information is fully reflected in prices. If strong form efficiency holds, it should not even be possible for insiders like managers, owners, bankers, politicians, or judges using private information to obtain consistent excess profits. Even insiders trading on their information (independent of legal and ethical considerations) are engaging in useless activities.
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