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Answer:
0.11 percent
Explanation:
In finance, an abnormal return is obtained by deducting the expected return of a security or of a portfolio of security determined by the market performance from the actual return of the security or portfolio of security for certain period of time. Abnormal return can therefore be calculated as follows:
Abnormal return = Actual return - Expected return .......... (1)
Factors that bring about abnormal return include increases in interest rate, announcement of dividends and earnings, lawsuits, and mergers.
On the other hand, cumulative abnormal return (CAR) is the addition of all abnormal returns of a security or a portfolio of security for some number of days.
Therefore, cumulative abnormal return (CAR) of stocks in the question can be calculated as follows:
Step 1: Calculate the Abnormal Return for each stock using equation (1)
For Samson Co.:
Actual return = 0.7 percent
Expected return = 0.2 percent
Abnormal return = 0.7 – 0.2
= 0.5 percent
For Thompson Co.:
Actual return = 0.4 percent
Expected return = –0.3 percent
Abnormal return = 0.4 – (–0.3)
= 0.4 + 0.3
= 0.7 percent
For Whitewood Co.:
Actual return = –0.6 percent
Expected return = 0.4 percent
Abnormal return = –0.6 + 0.4
= –0.2 percent
Step 2: Calculate the Cumulative Abnormal Return (CAR)
CAR is the addition of the abnormal returns of Samson Co., Thompson Co., and Whitewood Co., and this is calculated as follows:
CAR = 0.5 + 0.7 + (–0.2)
= 0.13 – 0.2
= 0.11 percent
Therefore, the combined cumulative abnormal return for the announcement date is 0.11 percent.
I wish you the best.
An abnormal return is calculated in finance by subtracting the expected return of a specific investment of investments estimated by market efficiency from the return rate of the specific investment of investments for a given time frame.
The combined cumulative abnormal return for the announcement date is 0.11 percent
Abnormal return is calculated as:
Abnormal return = Actual return - Expected return .......... (1)
Higher interest rates, payouts, and income statements, disputes, and mergers are all factors that cause anomalous returns.
Cumulative abnormal return is the sum of all excess returns of particular security of assets over a period of time.
Step 1: Calculate the Abnormal Return for each stock using equation (1)
For Samson Co.:
Actual return = 0.7 percent
Expected return = 0.2 percent
Abnormal return = 0.7 – 0.2
= 0.5 percent
For Thompson Co.:
Actual return = 0.4 percent
Expected return = –0.3 percent
Abnormal return = 0.4 – (–0.3)
= 0.4 + 0.3
= 0.7 percent
For Whitewood Co.:
Actual return = –0.6 percent
Expected return = 0.4 percent
Abnormal return = –0.6 + 0.4
= –0.2 percent
Step 2: Calculate the Cumulative Abnormal Return (CAR)
CAR is the addition of the abnormal returns of Samson Co., Thompson Co., and Whitewood Co., and this is calculated as follows:
CAR = 0.5 + 0.7 + (–0.2)
= 0.13 – 0.2
= 0.11 percent
Therefore, the combined cumulative abnormal return for the announcement date is 0.11 percent.
To know more about the calculation of the abnormal returns, refer to the link below:
https://brainly.com/question/4130545
