Question

millie owns stock in an energy company. she has noticed that the market value of her stock does not seem to fall when the company issues no dividends.

the markets response to the company supports the idea of ______.

nformation asymmetry
the dividend effect
dividend irrelevance
reinvestment bias

Explanation:

The problem is about stock market behavior regarding dividends. "Dividend irrelevance" theory suggests a firm's dividend policy (like issuing no dividends) doesn't affect its stock value. Here, the stock’s market value doesn’t fall with no dividends, supporting this theory. "Information asymmetry" is about unequal info, "the dividend effect" (if it existed as a theory for value drop) doesn't fit, and "reinvestment bias" is about investor behavior, not stock value response to dividends.

Answer:

C. dividend irrelevance