FINA 395 Chapter Notes - Chapter 14: Efficient-Market Hypothesis, Weighted Arithmetic Mean, Westjet
25 Jan 2015
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14. 1to find the cumulative abnormal returns, we chart the abnormal returns for each of the three airlines for the days preceding and following the announcement. The abnormal return is calculated by subtracting the market return from a stock"s return on a particular day, ri rm. Group the returns by the number of days before or after the announcement for each respective airline. Calculate the cumulative average abnormal return by adding each abnormal return to the previous day"s abnormal return. Moreover, the market reacts only on the day of the announcement. Before and after the event, the cumulative abnormal returns are relatively flat. 14. 2 the diagram does not support the efficient markets hypothesis. The car should remain relatively flat following the announcements. The diagram reveals that the car rose in the first month, only to drift down to lower levels during later months. Such movement violates the semi-strong form of the.
