Studies of negative earnings surprises have shown that there is A) a negative abnormal return on the day that negative earnings surprises are announced. B) a positive drift in the stock price on the days following the earnings surprise announcement. C) a negative drift in the stock price on the days following the earnings surprise announcement. D) a negative abnormal return on the day that negative earnings surprises are announced and a negative drift in the stock price on the days following the earnings surprise announcement. E) a negative abnormal return on the day that negative earnings surprises are announced and a positive drift in the stock price on the days following the earnings surprise announcement.

Studies of negative earnings surprises have shown that there is A) a negative abnormal return on the day that negative earnings surprises are announced. B) a positive drift in the stock price on the days following the earnings surprise announcement. C) a negative drift in the stock price on the days following the earnings surprise announcement. D) a negative abnormal return on the day that negative earnings surprises are announced and a negative drift in the stock price on the days following the earnings surprise announcement. E) a negative abnormal return on the day that negative earnings surprises are announced and a positive drift in the stock price on the days following the earnings surprise announcement.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter14: Valuation: Market-based Approach

Section: Chapter Questions

Problem 17QE

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Suppose you find that prices of stocks before large dividend increases show on average consistently positive abnormal returns. Is this a violation of the EMH?
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