Which of these scenarios indicates market efficiency

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Reference no: EM131050327

Aerotech, an aerospace technology research firm, announced this morning that its hired the world's most knowledgeable and prolific space researchers. Before today, Aerotech's stock had been selling for $100. Assumed that no other information is received over the next week and the stock market as a whole does not move.

a) What do you expect will happen to Aerotech's stock?

b) Consider the following scenarios:

i) The stock price jumps to $118 on the day of the announcement. In the subsequent days, it floats up to $116

ii) The stock price jumps to $116 and remains at that level.

iii) The stock price gradually climbs to $116 over the next week.

c) Which of these scenarios indicates market efficiency? which don not? why?

Reference no: EM131050327

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