10. (Market efficiency reaction to news) On 17 July 2015, ABC Corporation reported an increase of 2...

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10. (Market efficiency— reaction to news) On 17 July 2015, ABC Corporation reported an increase of 2 cents in earnings per share (EPS). Nevertheless, the price of the stock dropped by $1.50. In contrast, on the same day, the DEF Company reported a decrease of 3 cents in its EPS, but the stock price rose by $2.20. A journalist wrote that “since this is the only new information received on 17 July about ABC and DEF, this proves that the stock market is inefficient.” Is the journalist’s statement correct?

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Principles Of Finance With Excel

ISBN: 9780190296384

3rd Edition

Authors: Simon Benninga, Tal Mofkadi

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