Semi-strong form of market efficiency

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Reference no: EM13883146

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: EM13883146

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