Question

Nicholas Manufacturing just announced yesterday that its fourth quarter earnings will be 10% higher than last...

Nicholas Manufacturing just announced yesterday that its fourth quarter earnings will be 10% higher than last year's fourth quarter. Nicholas had an abnormal return of 1.2% yesterday. This suggests that _________

A.

investors expected the earnings increase to be larger than what was actually announced.

B.

earnings are expected to decrease next quarter.

C.

Nicholas' stock will probably rise in value tomorrow.

D.

the market is not efficient.

E.

investors expected the earnings increase to be smaller than what was actually announced.

Homework Answers

Answer #1

When it was announced that earning will be 10% higher than last quarter then a positive abnormal return will reflect that investor have expected that earning increased to be smaller than what actually was announced by the company, so they have shown an abnormal return of 1.2%.

Rest of the options are not correct as it is not about learning expectation decreasing next quarter or marketed is Efficient or not.

Correct answer will be option (E)investors expected the earning increase to be smaller than what was actually announced.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Suppose that Intel announced yesterday that its 4th quarter earnings will be 10% higher than...
1. Suppose that Intel announced yesterday that its 4th quarter earnings will be 10% higher than last year's 4th quarter. You observe that Intel had an abnormal return of -1.2% yesterday. Is this possible if markets are efficient? Please explain your reasoning. 2. Consider a Mexican closed-end fund that is a claim to $100 of underlying assets per share and is trading at a price of $150 per share. Explain how you could take advantage of this mispricing, and what...
In January 2015, several large multinational corporations announced lower than expected earnings for the fourth quarter...
In January 2015, several large multinational corporations announced lower than expected earnings for the fourth quarter of 2014. Many blamed the monotonous profits on a strong dollar. How does this work? When the dollar gains value against foreign currencies, why does it hurt U.S. exports? How could this affect the demand for dollars and ultimately affect the exchange rate?
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
Asia’s e-commerce landscape has been booming in recent years. The swift adoption of smartphones and greater...
Asia’s e-commerce landscape has been booming in recent years. The swift adoption of smartphones and greater access to the internet has allowed consumers in the region to be a major force in the global digital economy. The expansion looks set to continue at a rapid pace. According to a November 2018 report by Fitch Solutions, e-commerce sales in the region are forecast to increase by 14.2% this year, with an estimated average annual increase of 14% over the medium term...
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT