(MULTIPLE CHOICE) Marc, an analyst, believes that next year's earnings for Company A will be...
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(MULTIPLE CHOICE) Marc, an analyst, believes that next year's earnings for Company A will be $1B and for Company B will be $1.5B. Eventually, Company A announces earnings of $1.1B and Company B announces earnings of $1.3B.
(Part A) What happens to stocks prices on the DAY earnings were announced, *assuming Efficient Market Hypothesis*?
(a). Companies A and B both go up
(b) Companies A and B will both go up, but A will go up more.
(c). A will go up, but B will go down
(d). Prices unchanged - information already incorporated
(Part B) What happens to stocks in the days AFTER earnings were announced, *assuming Efficient Market Hypothesis*?
(a). Companies A and B both go up
(b) Companies A and B will both go up, but A will go up more.
(c). A will go up, but B will go down
(d). Prices unchanged - information already incorporated
(Part C) What happens to stocks in the days AFTER earnings were announced, *in practice*?
(a). Companies A and B both go up
(b) Companies A and B will both go up, but A will go up more.
(c). A will go up, but B will go down
(d). Prices unchanged - information already incorporated
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