Nanotech, a microchip development and research firm, announced this morning that it has hired the world’s most knowledgeable researchers on nanotechnology. Before today, Nanotech’s stock had been selling for $100. Assume that no other information is received over the next week and the stock market as a whole does not move.

a. What do you expect will happen to Nanotech’s stock?

b. Consider the following scenarios:

i. The stock price jumps to $118 on the day of the announcement. In subsequent days it floats up to $123, and then falls back to $116.

ii. The stock price jumps to $116 and remains at that level.

iii. The stock gradually climbs to $116 over the next week.

Which scenario(s) indicate market efficiency? Which do not? Why?