You are a portfolio manager (PM) at a small hedge fund and one of your analysts thinks they have identified a new trading opportunity. Specifically, they think the market initially underreacts to positive earnings announcements by Matts Beer Co. The analyst suggests that you should buy the stock on the earnings announcement day (if the news is positive) and hold it for one trading day. Your analyst provides the following evidence to support this claim:

January 15^th

The market expected Matts Beer Co. to report earnings of $0.50 per share however the firm reported earnings of $0.58 per share. The next day, on January 16^th, the stock price increased by 1.5%.

April 15^th

The market expected Matts Beer Co. to report earnings of $0.45 per share however the firm reported earnings of $0.48 per share. The next day, on April 16^th, the stock price increased by 0.8%.

September 15^th

The market expected Matts Beer Co. to report earnings of $0.82 per share however the firm reported earnings of $0.86 per share. The next day, on September 16^th, the stock price increased by 1.9%.

You know that the firm has a beta of 1.8, the risk-free rate is 0.1%, and that the market return was 1% on January 15^th, 0.6% on April 15^th, and 1.3% on September 15^th.

a) Should you agree to the strategy suggested by your analyst? Why or why not?