Consistent with the semi-strong form of market efficiency

Assignment Help Financial Management

Reference no: EM13881936

Geothermal corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market efficiency.

(a) When trading opened after the announcement, the stock price quickly decreased by 20%.

(b) The stock price of Geothermal increased slowly over the 30 days before the announcement that earnings were higher than last year.

(c) The stock price decreased by 10% immediately following the announcement but then increased throughout the day so that the closing price was only 2% below the previous day.

Reference no: EM13881936

Questions Cloud

Principal are loyalty-obedience-performance : The duties of an agent to her principal are loyalty, obedience, performance and which of the following: Administrative law agencies usually have three types of authority.

Calculate the cost of fuel of conventional energy system : Calculate the cost of fuel of a conventional (non-solar) energy system for 12 years, if the total annual load is 152 GJ and the fuel price is $14/GJ, the market discount rate is 8%, and the fuel inflation rate is 5% per year.

The initial cost of a solar energy system : The initial cost of a solar energy system is $14,000. If this amount is paid with a 30% down payment and the balance is borrowed at 8% interest for 12 years, calculate the annual payments [A] and interest charges [B] for a market discount rate of 6%...

What bid price should you submit : Dahlia Enterprises needs someone to supply it with 117,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $840,000 to install the equipment n..

Consistent with the semi-strong form of market efficiency : Geothermal corporation issued a press release before the stock market opened announcing that its earnings are above last year’s earnings. Explain how each of the following individual scenarios could be consistent with the semi-strong form of market e..

Set out the playoffs on this portfolio on expiration date : Suppose you create a portfolio by holding 100 shares of mcdonalds stock, writing a call option on the stock with an exercise price of 55 and one year to expiration and writing a put option on the same stock with an exercise price of 25 and one year t..

Unbiased expectations theory of structure of interest rates : Suppose we observe the following rates: 1R1 = 3%, 1R2 = 5%. If the unbiased expectations theory of the term structure of interest rates holds, what is the 1-year interest rate expected one year from now, E(2r1)?

The current spot exchange rate : The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..

Expected to pay the dividends over the next four years : Lohn Corporation is expected to pay the following dividends over the next four years: $14, $10, $9, and $4.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 10..

User Account

All Pages