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Statement 1: Firms with high prices relative to their fundamentals are more likely to be growth stocks than value stocks. Statement 2: The post earnings

Statement 1: Firms with high prices relative to their fundamentals are more likely to be growth stocks than value stocks. Statement 2: The post earnings announcement drift (PEAD) phenomenon finds that when a company has a positive (negative) earnings surprise, the market tends to over-react in the same direction as the surprise and that prices then reverse and drift slightly back in the other direction.

A.

Yes.

B.

No. Both are not true.

C.

No. Only statement 1 is true.

D.

No. Only statement 2 is true.

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