Investors expect a company to announce a 10% increase in earnings; instead, the company announces a 1%

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Investors expect a company to announce a 10% increase in earnings; instead, the company announces a 1% increase. If the market is semi-strong form efficient, which of the following would you expect to happen?

a. The stock’s price will increase slightly because the company had a slight increase in earnings.

b. The stock’s price will fall because the earnings increase was less than expected.

c. The stock’s price will stay the same because earnings announcements have no effect if the market is semi-strong form efficient.

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Fundamentals of Financial Management

ISBN: 978-0324664553

Concise 6th Edition

Authors: Eugene F. Brigham, Joel F. Houston

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Question Posted: Oct 05, 2011 09:44 AM

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Investors expect a company to announce a 10% increase in earnings; instead, the company announces a 1%

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Fundamentals of Financial Management

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