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(MULTIPLE CHOICE) Marc, an analyst, believes that next year's earnings for Company A will be...

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Finance

(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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