The abnormal return in an event study is described as the
A)actual return on a security minus the market rate of return on the same date.
B)total return earned by a security on the date of an announcement affecting that security.
C)total return earned on a security for the 7-day period commencing 3 days prior to an announcement affecting that security.
D)change in market value of a security on the day of an announcement affecting that security.
E)any change in the market price of a security that exceeds 5 percent over a 7-day period.

Question

Quizplus · Accepted Answer

The abnormal return in an event study is the difference between the actual return on a security and the expected return based on the market rate of return on the same date. It is used to measure the impact of a specific event or announcement on the value of a security, after controlling for the overall movement of the market. Therefore, choice A is the correct answer. The other options are not accurate descriptions of abnormal return.

The Abnormal Return in an Event Study Is Described as the