QQAG just announced yesterday that its fourth quarter earnings will be 35% highe

Question

QQAG just announced yesterday that its fourth quarter earnings will be 35% higher than last year's fourth quarter. You observe that QQAG had an abnormal return of -1.7% yesterday. This suggests that

Multiple Choice

A. investors expected the earnings increase to be smaller than what was actually announced.

B. earnings are expected to decrease next quarter.

C. QQAG stock will probably rise in value tomorrow.

D. the market is not efficient.

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

Explanation / Answer

ANSWER : E.investors expected the earnings increase to be larger than what was actually announced.

A negative market response indicates that the earnings surprise was negative, that is, the increase was less than anticipated.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.