Efficient market hypothesis


Today, the following announcement was made: "early today the Justice Department reached a decision in the Universal Product Care (UPC) case. UPC has been found guilty of discriminatory practices in hiring. For the next five years, UPC must pay $2 million each year to a fund representing victims of UPC's policies." Assuming the market is efficient, should investors not buy UPC stock after the announcement because the litigation will cause an abnormally low rate of return? Explain.

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Finance Basics: Efficient market hypothesis
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