Why do stock prices change dramatically in value within seconds after release of financial results? After all, it is impossible to analyze such a large amount of information in such a short time.
In: Economics
Company A announces Sales of $1B and Net Earnings of $250M, but before that, everyone had expected Sales of $1.2B and Net Earnings of $300M.
It doesn’t take long to figure out “That’s bad”
But afterwards there are deeper dives into the earnings release that explain Sales are lower because they had to revamp production lines which resulted in delayed shipments and that the new production facilities will improve their operating margin by 25%.
Yeah, it takes a while to understand the implications of that one which may be much better overall in the long run, but in the first few moments people only care about the first head line.
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