Asked by Ramanan Srinivasagopalan on May 09, 2024
Verified
According to the efficient markets hypothesis, worse-than-expected news about a corporation will
A) have no effect on its stock price.
B) raise the price of the stock.
C) lower the price of the stock.
D) change the price of the stock in a random direction.
Efficient Markets Hypothesis
The theory that stock prices fully reflect all available information, making it impossible to consistently achieve higher returns.
Stock Price
The current market price at which a share of a company's stock can be bought or sold.
- Comprehend the concepts underlying the efficient market hypothesis (EMH) and its consequences for the behavior of stock prices and investor decisions.
- Ascertain and apprehend the effect of media announcements and company maneuvers on equity pricing in the context of the Efficient Market Hypothesis.
Verified Answer
MM
Maylasia MinyardMay 13, 2024
Final Answer :
C
Explanation :
The efficient markets hypothesis suggests that all available information is already reflected in stock prices. Therefore, worse-than-expected news about a corporation would lead to a decrease in its stock price as the market adjusts to the new information.
Learning Objectives
- Comprehend the concepts underlying the efficient market hypothesis (EMH) and its consequences for the behavior of stock prices and investor decisions.
- Ascertain and apprehend the effect of media announcements and company maneuvers on equity pricing in the context of the Efficient Market Hypothesis.
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