Green Mountain Producers Inc. is an oil drilling company. The company paid a dividend of $2.80 last year, and, in the past, its dividend has increased steadily by about 4% a year. Green Mountain just announced that its dividend will increase to $3.75 this year, and its share price rose from $35 per share to $38 per share immediately after the announcement. Which of the following best explains why Green Mountain's stock price increased as it did? 

The signaling hypothesis 

The clientele effect 

MM dividend irrelevance

Answer rating: 100% (QA)

The signaling hypothesis best explains why Green Mountains stock price increased as it did The signa... View the full answer