Answer Happy

Question III.2.
You believe that it is good news for investors in a company when a
company is going to be acquired. You collect information on
announcements of acquisitions and compute the abnormal returns of
these acquired companies in the days before, during and after the
announcements. Across the companies, you notice that stock prices
are up 2% in the three days before the announcement, jump another
5% on the announcement and go up another 3% in the ten days after
the announcement. Which of the following conclusions would you
draw? You could choose several letters. Please explain your
choice.
a) Your hypothesis is correct. Acquisitions are good news for
investors, on average.
b) There are insiders who have access to the information in
the days before the announcement who trade on that
information.
c) The news announcement is still a surprise to most in the market
(albeit a positive one).
d) Investors are still unsettled after the announcement and
take a while to adjust to the news.