Friday, May 23, 2008

Market Inefficiency

Challenger Infrastructure Fund is down 22% today currently. Yesterday they reported that they sold their holding of Arqiva and ceased takeover talks with Arkmile. The stock fell a few cents yesterday. As reaction was muted to the ending of the takeover talks and I liked the Arqiva sale, I increased my position by 50%. And then today the stock collapses.... There is no new news reported today. So I can only assume that this is a delayed reaction to yesterday's news. In which case, this is good evidence that prices do not respond instantaneously to the news. People had all day yesterday to sell. Are these retail investors who only heard the news after their working day yesterday who are selling? Or is there some new news that hasn't yet been released to the market? There are some larger blocks transacting including one for 50000 shares (which didn't move the price but sold near the lows so far today). Lack of big blocks is not evidence of anything though...

Trading is very volatile. The stock is now down 17% only as I complete my post. In case there is something I haven't heard about I am not going to add further to my position.

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