Music Doctors just announced yesterday that its first quarter sales were 35% higher than last year's first quarter.You observe that Music Doctors had an abnormal return of -2% yesterday.This suggests that
A)the market is not efficient.
B)Music Doctors stock will probably rise in value tomorrow.
C)investors expected the sales increase to be larger than what was actually announced.
D)investors expected the sales increase to be smaller than what was actually announced.

Question

Quizplus · Accepted Answer

The abnormal return of -2% suggests that investors were expecting a larger sales increase than what was actually announced, leading to disappointment in the market and a drop in the stock price. This does not necessarily indicate market inefficiency or guarantee a rise in stock value the next day.

Music Doctors Just Announced Yesterday That Its First Quarter Sales