Which of the following is not a possible cause of post-earnings-announcement drift?
a. Financial analysts over-react to fundamental signals stemming from securities.
b. Shareholders do not distinguish well between the cash flow portions and the accrual portions of earnings.
c. Financial analysts’ forecast errors lead to incomplete security price adjustments.
d. Transaction costs are too high relative to the potential gain that can be earned from the mispricing of the securities.
ANSWER: A
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