Asked by Aimae Surig on Jul 11, 2024
Verified
Which of the following does NOT correctly complete this sentence: In general, the link between an information announcement and the stock price is that ____________________.
A) The expected stock return will change if the announcement contains a surprise component.
B) The stock price will not change if the announcement provided only anticipated information.
C) Only announcements that have already been discounted will affect the stock price.
D) In order for the price of the stock to change, the announcement must be relevant to that particular stock and must be unanticipated.
E) If markets are efficient in the semi-strong form, then the market will react rapidly to the new information.
Semi-Strong Form
A hypothesis suggesting that all publicly available information is already reflected in stock prices, negating the ability to earn excess returns.
Information Announcement
A disclosure of new, relevant details intended to inform investors, employees, and the public about a company's financial health, operational changes, or other significant news.
Stock Price
The current price at which a share of a company is being traded on the stock market.
- Describe the principles of market efficiency and their relevance to information announcements and stock prices.
Verified Answer
RI
Ryley InmanJul 17, 2024
Final Answer :
C
Explanation :
C) is incorrect because it suggests that only previously considered or "discounted" announcements will affect stock prices, which contradicts the general understanding that it's new, unanticipated information that impacts stock prices.
Learning Objectives
- Describe the principles of market efficiency and their relevance to information announcements and stock prices.