https://file.aiquickdraw.com/mathbot/file/1726690766636sf1fh65j.jpg

To calculate the **Cumulative Abnormal Return (CAR)** 4 days before the announcement, we assume the company's expected return matches the market return for each day. Here's how to proceed:

### Step-by-Step Process:

1. **Identify the relevant dates**: The announcement was on **November 14th**, so we need to focus on the returns from **November 7th to November 10th** (4 days before the announcement).

2. **Calculate abnormal return for each day**: 
   \[
   \text{Abnormal Return} = \text{Company Return} - \text{Market Return}
   \]
   Use this formula for each of the 4 days.

3. **Sum up the abnormal returns** over the 4 days to get the **Cumulative Abnormal Return (CAR)**.

Let's perform the calculations for each day:

- **November 7**: 
  \[
  \text{Abnormal Return} = 0.4\% - 0.8\% = -0.4\%
  \]
- **November 8**: 
  \[
  \text{Abnormal Return} = 0.4\% - 0.6\% = -0.2\%
  \]
- **November 9**: 
  \[
  \text{Abnormal Return} = -0.3\% - (-0.5\%) = 0.2\%
  \]
- **November 10**: 
  \[
  \text{Abnormal Return} = -0.5\% - (-0.6\%) = 0.1\%
  \]

4. **Cumulative Abnormal Return (CAR)**: 
   \[
   \text{CAR} = (-0.4\%) + (-0.2\%) + 0.2\% + 0.1\% = -0.3\%
   \]

So, the **Cumulative Abnormal Return (CAR)** for the 4 days before the announcement is **-0.3%**.

Would you like further clarification or details on any of these steps?

Here are five related questions to explore:
1. How do abnormal returns affect stock price predictions?
2. What other methods can be used to calculate abnormal returns?
3. How does the Cumulative Abnormal Return (CAR) reflect investor sentiment?
4. How can CAR be used to assess market efficiency?
5. What role does CAR play in financial event studies?

**Tip**: Always check if the market trend reflects systemic issues or if specific events influence abnormal returns to make better investment decisions.

Calculate the cumulative abnormal return 4 days before the announcement, assuming the company's expected return matches the market return.

Learn how to calculate the Cumulative Abnormal Return (CAR) 4 days before the CEO's resignation announcement by comparing company and market returns. This process covers key financial concepts related to abnormal returns and their impact on company stock performance.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation