U. S. Bancorp holds a press conference to announce a positive news event that was unexpected to the market. As soon as the announcement is made, the stock price increases $8 per share but then over the next hour the price continues to increase resulting in a total increase of $11.

1. Given this information which of the following statements is correct?

A. This is an example of a market overreaction.

B. This is an example of a market underreaction.

C. This is an example of a semi-strong efficient market.

D. None of these statements is correct.

Question

Business

India Castillo

26 March, 13:52

U. S. Bancorp holds a press conference to announce a positive news event that was unexpected to the market. As soon as the announcement is made, the stock price increases $8 per share but then over the next hour the price continues to increase resulting in a total increase of $11.

1. Given this information which of the following statements is correct?

A. This is an example of a market overreaction.

B. This is an example of a market underreaction.

C. This is an example of a semi-strong efficient market.

D. None of these statements is correct.

+2

Answers (1)

Know the Answer?

Carter Love · Answer 1

The correct answer is B. This is an example of a market underreaction.

Explanation:

The term undervalued refers to the state an asset is in when studying its valuation or listing and observing that it is below what could be considered its real or fair value. In the case of stocks, this phenomenon is experienced when earnings are not expected and therefore the generation of benefits is negatively impacted, taking into account that securities have prices determined by factors such as earnings, benefits and other factors. external social.