Question

Which of the following is correct? Typically, stock prices rise from Friday's close to Monday's open, according to the weekend effect. O Market reactions to quarterly earnings announcements are immediate. Stock prices fully anticipate information contained in earnings announcements prior to the actual announcement. High P/E stocks tend to underperform low P/E stocks, even after adjusting for risk.

Answer 1

Market reactions to quarterly earning are always immediate in nature because the quarterly earnings are not discounted in the price before they are announced, so generally they are a new kind of information to the market and the reaction is immediate.

Rest of the given statements are false because there is no trend like stock price will rise from Friday close to Monday open and stock price never fully anticipate the earning in advance and High P/E Stocks does not tend to outperform the low P/E even after adjustment for risk.

So the correct statement would be statement( b).

And the correct answer would be option (B)