Question: Academics and practitioners agree that stock prices change in response to
Academics and practitioners agree that stock prices change in response to changes in macroeconomic factors, industry-level factors, and firm-specific factors. One example of a firm-specific factor that affects stock prices is corporate earnings announcements. Consider the following statement: “A company’s stock price will increase if the company announces increases in earnings and dividends.” Is this statement always true, only sometimes true, or never true? Carefully justify your answer.
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