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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

Yes,

Efficient market hypothesis says that all information are already incorporated in the share price. So it could be that market thought that the sales will tumble by more than 30%, but when the report was out and it was only 30%, so the stock performed well and beat market expectation. So Efficient market hypothesis is being beaten, under EMH the market should know everything correctly. That is market should have guessed the 30% tumble correctly and price should have reflected it.

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