A company unexpectedly announces a product recall due to safety concerns about its product.According to the efficient markets hypothesis,this news should
A)raise the price of the company's stock.
B)not affect the price of the company's stock.
C)reduce the price of the company's stock.
D)More information is needed to answer the question.

Question

Quizplus · Accepted Answer

According to the efficient markets hypothesis, all publicly available information is already reflected in the current stock price. Therefore, the announcement of a product recall due to safety concerns should negatively impact the company's image and potentially lead to legal liabilities, which can lead to a decrease in demand and ultimately, a reduction in the price of the company's stock.

A Company Unexpectedly Announces a Product Recall Due to Safety