The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight during the peak of the citrus harvest. In an efficient market, one would expect the price of Florida Orange's stock to
A) drop immediately.
B) unable to determine.
C) increase immediately.
D) gradually decline for the next several weeks.
E) gradually increase for the next several weeks.

Question

Quizplus · Accepted Answer

In an efficient market, all available information is immediately incorporated into stock prices. Therefore, the expectation of a devastating freeze, which would likely damage the citrus harvest and negatively impact Florida Orange's business, would cause the stock price to drop immediately as investors react to the news.

The Weather Report Says That a Devastating and Unexpected Freeze