Efficiency of stock markets is one of the crucial assumptions for the stock price maximization objective. Assuming that the markets are perfectly efficient which of the following is the correct stock price response after a surprise good news?

a.

An immediate increase in the stock price on the announcement but no price drift thereafter

b.

An immediate increase in the stock price and a gradual decrease in the days thereafter

c.

No change in stock prices

d.

An immediate increase in the stock price and a gradual increase in the days thereafter

Answer C - no change in stock prices, was Incorrect!!!