If markets are strong-form efficient,then event studies should show that new information affects a related stock's price
A)for a single day.
B)only when the new information relates to a dividend payment.
C)over a range of days with the overreactions exactly offsetting the underreactions.
D)only if the information is company specific.
E)by a very minimal amount,if any.

Question

Quizplus · Accepted Answer

If markets are strong-form efficient, the current stock prices will accurately and completely reflect all relevant market and non-market information, including insider information. Therefore, any new information that becomes available will be quickly and correctly incorporated into the stock price, resulting in an immediate reaction on the same day the information is released. This is what event studies aim to capture - the relationship between a specific event and the related stock's price movement. Option A implies that new information affects the stock price for a single day, which correlates with the concept of strong-form efficiency.

If Markets Are Strong-Form Efficient,then Event Studies Should Show That