Problem
Consider the following two anecdotes: In February 2020, Wells Fargo bank agreed to pay $3 billion to settle criminal and civil charges related to opening accounts without customer permission and other fraudulent practices. Wells Fargo stock fell by nearly 50% over the next month, even though it had not yet paid any of the $3 billion settlement.
In late July 2021, US. Senate Majority Leader Chuck Schumer and Senator Joe Manchin of West Virginia announced a compromise on legislation that included generous tax credits for homeowners opting to install solar panels. SunPower Corporation, a solar panel company specializing in residential installation, saw its stock jump 70% over the next 3 weeks, before the law was passed.
a) What "hypothesis" do these two anecdotes illustrate?
b) Provide some intuition about why the stock prices changed before anything "substantial" changed in terms of the actual business operations for these companies.