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
A)the market is not efficient.
B)QQAG stock will probably rise in value tomorrow.
C)investors expected the earnings increase to be larger than what was actually announced.
D)investors expected the earnings increase to be smaller than what was actually announced.

Question

Quizplus · Accepted Answer

The abnormal return of -1.7% suggests that investors were expecting a higher increase in earnings than what was actually announced. Therefore, they were disappointed with the news and sold off their shares, resulting in a decrease in stock value.

QQAG Just Announced Yesterday That Its Fourth Quarter Earnings Will