Question

The weather report says that a devastating and unexpected freeze is expected to hit Florida tonight during the peak of the citrus harvest.

In an efficient market, one would expect the price of Florida Orange's stock to:

A. drop immediately.
B. remain unchanged.
C. increase immediately.
D. gradually decline for the next several weeks.
E. gradually increase for the next several weeks.

Answer 1

A. drop immediately.

Step-by-step explanation:

In an efficient market it is assumed that assets within it will consistently reflect all information that affects that asset. Thearket is very responsive to new information and adjusts accordingly.

If the weather report says that a devastating and unexpected freeze is expected to hit Florida tonight during the peak of the citrus harvest, there will be an immediate drip in the price of Orange's stock.

A later news that is positive will cause a rise in price of the stock.