13.10 Sooners Investing Agency has been the hottest stock picker for the past two years. Before the...

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13.10 Sooners Investing Agency has been the hottest stock picker for the past two years.

Before the rise to fame occurred, subscribers to the Sooners newsletter totaled only 200.

Those subscribers beat the market consistently; they earned substantially higher returns after adjustment for risk and transaction costs. Subscriptions have now skyrocketed to 10,000. Now when Sooners recommends a stock, the stock price instantly rises several points. The subscribers now earn only a normal return when they buy recommended stock because the price rises before anybody can act on the information. Briefly explain this phenomenon.

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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