You have been doing some intense investment research on stocks, particularly stocks that have cut their dividends. You have studied dividend-cutting companies going back through time, not just in recent years, so your analysis covers a broad range of stocks which, collectively, are of about average risk (that is, the stocks you have studied, on average, are about as risky as the average stock available in the market). In your research, you have observed the following patterns. For each pattern write a sentence or two indicating whether the patterns seems broadly consistent or broadly inconsistent with the notion that the stock market is efficient. Your sentences should very briefly explain WHY you take a particular view.

1. On the day that companies announce their plans to cut dividends, the stock price falls a few percentage points, on average. Note that these announcements precede the actual dividend cut by a few weeks. That is, the company says they will cut the dividend, and a few weeks later when they actually pay the next dividend, it is smaller than the last one they paid.

2. Looking backwards in time relative to the announcement day (from 1 above), you notice that on average these companies' stock returns have been under performing the overall stock market for several months.

3. Look forward in time, starting one day AFTER the announcement day (from 1 above), you notice that on average these companies' stock returns under perform the overall market by several percentage points for the next few months.