Final answer:
The efficient market hypothesis suggests that SLE Inc.'s shares would decrease immediately to reflect the unexpected 20% drop in profit, as stock prices incorporate all known information and adjust to new data quickly.
Step-by-step explanation:
A follower of the efficient market hypothesis would likely expect the shares of SLE Inc. to decrease in value immediately after the announcement of the actual profit fall. This expectation is based on the premise that stock prices incorporate all available information, including analysts' predictions and actual company performance. Since the reported 20% fall in profit is far worse than the 10% that analysts had expected, the share prices would adjust to reflect this new, worse-than-expected information. Anymore anticipated adjustments would depend on how investors believe the company will perform in the future compared to current expectations.
The efficient market hypothesis holds that it is difficult to consistently achieve returns higher than the market average because stock prices already reflect all known information. As such, finding undervalued stocks that can outperform the market is seen as challenging because any information that would indicate a company's shining prospects would already be priced into the stock. Therefore, the drop in SLE Inc.'s share price would occur quickly, leaving little to no opportunity for investors to trade on the surprise decline in profits before the market fully reflects it in the stock price.