Enberg Manufacturing annual EPS for last year was $2.25. Later this week, Enberg
ID: 2784532 • Letter: E
Question
Enberg Manufacturing annual EPS for last year was $2.25. Later this week, Enberg will announce this year's annual EPS. The consensus analyst forecast for this year's annual EPS is $3. Suppose the actual EPS will be $2.5, but only insiders know this fact. If the market is semistrong-form efficient, which of the following is most likely to happen when Enberg publicly announces its current EPS?
Enberg stock price will decrease because its EPS is lower than analyst expected.
Enberg stock price will not change because the market already has incorporated that information into the stock price.
Enberg stock price will decrease becasue its EPS has increased this year.
Enberg stock price will increase because its EPS is higher than analyst expected.
Enberg stock price will increase because its EPS has increased this year.
If the market is strong-form efficient, which of the following is most likely to happen when Enberg publicly announces its current EPS?
Enberg stock price will decrease because its EPS is lower than analyst expected.
Enberg stock price will not change because the market already has incorporated that information into the stock price.
Enberg stock price will decrease becasue its EPS has increased this year.
Enberg stock price will increase because its EPS is higher than analyst expected.
Enberg stock price will increase because its EPS has increased this year.
Explanation / Answer
1
Enberg stock price will decrease because its EPS is lower than analyst expected.
Semi-strong form efficiency : All public information captured in current share price, implying fundamental or technical analysis cannot be used for achieving superior gains. Hence, only that information which is not publicly available would benefit investors for abnormal returns
2
Enberg stock price will not change because the market already has incorporated that information into the stock price.
Strong form efficiency: All information- public or private, is already captured in stock's price and not even insider information will give advanteage to an investor
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