1Efficient markets Are the following statements true or false? Explain your answ

Question

1Efficient markets

Are the following statements true or false? Explain your answer in no more than two sentences.

(a) Good News, Inc., just announced an increase in its annual earnings, yet its stock price fell. This may be consistent with the efficient markets hypothesis.

(b) If the stock market is efficient in the semi-strong sense, there should be, on average, no increase in a company's stock price before the company announces good news about its business.

(c) If risky stocks on average have higher returns than safe stocks, the efficient market hypothesis may still hold.

(d) The efficient markets hypothesis must fail, because lots of investors do crazy things in the market.

Explanation / Answer

1)FALSE

The market may have anticipated even greater earnings. Compared to prior expectations, the announcement was a dissapointment

2)TRUE

3)FALSE

4)TRUE

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