The sophistication of investors accounts for the positive association between price changes and unexpected earnings. Lesssophisticated investors tend to:

Select one:

A.

Underreact to good news and underreact to bad news.

B.

React to good news but underreact to negative unexpected earnings.

C.

Overreact to good news and overreact to bad news.

D.

Have the same reactions as their sophisticated counterparts.