How should cumulative abnormal returns react in an efficient market?
A) relatively constant, sharp break, relatively constant
B) relatively constant with no breaks
C) steadily increasing
D) steadily decreasing
E) remain constant at zero

Question

Quizplus · Accepted Answer

In an efficient market, cumulative abnormal returns should remain relatively constant, experience a sharp break when new information is released, and then return to a relatively constant level, reflecting the immediate incorporation of new information into stock prices.

How Should Cumulative Abnormal Returns React in an Efficient Market