Questions: Which one of the following is the most likely reason why a stock price might not react at all on the day that new information related to the stock's issuer is released? Assume the market is semistrong form efficient. A) Company insiders were aware of the information prior to the announcement. B) Investors do not pay attention to daily news. C) Investors tend to overreact. D) The news was positive. E) The information was expected.

The answer is the last one (E): The information was expected.

Explanation for each option: A) Company insiders were aware of the information prior to the announcement.

• This option is incorrect because even if insiders were aware, the stock price would have already adjusted to reflect this information before the public announcement, assuming insider trading laws were not violated.

B) Investors do not pay attention to daily news.

• This option is incorrect because in a semistrong form efficient market, all publicly available information is already reflected in stock prices, implying that investors do pay attention to news.

C) Investors tend to overreact.

• This option is incorrect because overreaction would typically cause a noticeable change in stock price, not a lack of reaction.

D) The news was positive.

• This option is incorrect because positive news would generally cause the stock price to increase, not remain unchanged.

E) The information was expected.

• This option is correct because in a semistrong form efficient market, stock prices already reflect all publicly available information. If the information was expected, it would have already been incorporated into the stock price, resulting in no significant reaction when the information is officially released.

Summary: In a semistrong form efficient market, stock prices reflect all publicly available information. Therefore, if new information was expected, it would already be priced into the stock, leading to no significant reaction when the information is released.