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On 3/31/2020, Company ABC released its quarterly report, showing the sales in the first quarter had...

On 3/31/2020, Company ABC released its quarterly report, showing the sales in the first quarter had tumbled 30% as pandemic hit. However, the stock price for company ABC went up by 3% right after the report was released. Does this mean a failure for the Market Efficient Theory?

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Answer #1

Market efficient hypothesis advocates that all the publicly available information as well as privately available information have already been incorporated into the stock price and market will only react to the new information available.

When the stock announced its quarterly earnings it reflected that it has seen contraction into its overall sales but the share price increased because decrease of salesl have already been incorporated into the stock price as management are believed to be the insiders and they would have acted on the quarterly information before it was made public so show so it is in direct contradiction of efficient market hypothesis as the privately available information was not discounted in the price.

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