Which of the following does NOT correctly complete this sentence: In general, the link between an information announcement and the stock price is that ____________________.
A) The expected stock return will change if the announcement contains a surprise component.
B) The stock price will not change if the announcement provided only anticipated information.
C) Only announcements that have already been discounted will affect the stock price.
D) In order for the price of the stock to change, the announcement must be relevant to that particular stock and must be unanticipated.
E) If markets are eﬃcient in the semi-strong form, then the market will react rapidly to the new information.

Question

Quizplus · Accepted Answer

This statement is incorrect because announcements that have already been discounted may still affect the stock price. The market may have already priced in some expected news, but if the actual announcement differs from what was anticipated, it can still cause a change in the stock price. Therefore, statement C is not a correct completion of the sentence.

Which of the Following Does NOT Correctly Complete This Sentence