Question

Ford announces recalling 620,246 U.S.-market vehicles to fix a problem with a rearview camera that may leave a blank or distorted screen. What will happen to the stock price of Ford if markets are semi strong efficient:

A) The stock price will gradually decrease over a period of time.

B) The stock price will not be affected and remain the same as Ford is taking positive action

C) The stock price will immediately reduce to a value that would factor in this information.

D) The stock price will start going up in the long run since the problem will be solved

E) The stock price will change only if insiders start trading

Answer 1

This was an insider information before it was announced in the market so the market will be treating it as a new information which was not public in nature and semi Efficient market will be trying to quickly discount that new information and the stock price will be immediately reduced to a value which will be factoring into all the events quickly.

All the other options are false

Correct answer will be option ( C)the stock price will immediately reduced to a value that would factor in this information.