Nicholas Manufacturingjust announced yesterday that its 4th quarter earnings wil

Question

Nicholas Manufacturingjust announced yesterday that its 4th quarter earnings will be 10%higher than la 4th quarter. You observe that Nicholas had an abnormal return of-1.2% yesterday. This most likely sugi a. the market is not efficient because investors completely ignore the news. b. Nicholas' stock will probably rise in value next month. c. investors expected the earnings increase to be larger than what was actually announced. d. investors expected the earnings increase to be smaller than what was actually announced. e. None of the above options is correct. 5,

Explanation / Answer

c. investors expected the earnings to be larger than what was actually announced

since it turned out to be less, the abnormal return was negative

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