4. The post-earnings announcement drift (PEAD) refers to a phenomenon that stock

Question

4. The post-earnings announcement drift (PEAD) refers to a phenomenon that stock prices show positive (negativ drifts for a few months after positive (negative) earnings announcements. If we frequently observe PEADsn stock market, we would be able to reject a. only the wake-form efficient market hypothesis. b. only the semi-strong form efficient market hypothesis. c. both the semi-strong form and the strong-form efficient market hypotheses. d. only the strong-form efficient market hypothesis. e. None of the above options is correct.

Explanation / Answer

The post earnings announcement drift (PEAD) refer to a phenomenon that stock price shows positive (negative) drift for a few months after positive (negative) earnings announcement. If you frequently observe PEAD on stock market. You would be able to reject both Semi strong form market hypothesis and strong form market hypothesis.

Option (C) is correct answer.

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