Brady Lady Cosmetics just announced that earnings for the first quarter of the current year grew at an annualized rate of 3%, well above the rate for the same quarter the previous year. Upon the announcement, the stock price did not change. (The market in general was unchanged also.) Which of the following is most likely correct?

A) Brady's price didn't change since the market was surprised by the announcement.
B) Interest rates in the economy must have increased.
C) Brady's price didn't change because investors likely anticipated the news release.
D) Brady's price didn't change because the market in general was unchanged.
E) Brady must have a beta coefficient equal to 1.

Question

Zybrea Knight · Accepted Answer

Final Answer : C, Explanation :  C) The most likely reason Brady's stock price didn't change despite positive earnings news is that investors had already anticipated the announcement and priced it into the stock. Stock prices often move in anticipation of news, so if the news matches expectations, there might be little to no immediate impact on the stock price.

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