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12. You believ e that it is good news for investors in a company when a long time CEO is forced to resign. You collect information on announcements of forced resignations and the risk. adjusted returns in the days before, during and after the announcements. Across the companies, you notice that stock prices are up 2% in the ten days before the announcement, jump another 5% on the announcement and go up another 3% in the ten days after the announcement, which ofthe following conclusions would you draw? Explain your answer. CEO a Your hypothesis is correct. Forced CEO resignations are good news for b. There are insiders who have access to the information in the days before the c. The news announcement is still a surprise to most in the market (albeit a d. Investors are still unsettled after the announcement and take a while to e. All of the above. investors, on average announcement who trade on that information positive one adjust to the news.
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Answer #1

The answer will be e,

a) The CEO resignation is good as marker price of share has rose.

b) Insider have access to the information before announcement as share has rise 2% before announcement.

c) After the news the share rose by 5%.

d) As the share rose further by 3% in next 10 days post announcement.

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