Question

Suppose that interest rates unexpectedly rise and that fineline corporation announces that revenues from last quarter were down but not as much as the public had anticipated they would be down. according to the efficient markets hypothesis, which of the these things make the price of fineline corporation stock fall?

Answer 1

With rising interest rates most people will have less of an incentive to take out loans which will cause a slowing in economic activity on a macro scale. This slowing of economic activity is likely the cause of fineline corporation's stock price fall rather than having a smaller decrease in revenue than expected.