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solution

A headline reads: “LinkedIn shares drop 43% as weak forecast spooks investors” – The Guardian, Feb. 26, 2016. A graph shows LinkedIn’s share price from December 31, 2015 to May 31, 2016. The y-axis rises from $0 to $250 in increments of $50. The x-axis has 6 date entries. The share price is:

  • $225.08 on December 31, 2015
  • $197.91 on January 29, 2016
  • $117.19 on February 29, 2016
  • $114.35 on March 31, 2016
  • $125.31 on April 29, 2016
  • $136.50 on May 31, 2016

LinkedIn suffered a large drop in share value following an unexpectedly weak forecast of their future earnings. Why would this surprise cause investors to value LinkedIn lower?

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