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 three 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 five percent over a 7-day period.

Question

Quizplus · Accepted Answer

The abnormal return is calculated by subtracting the expected return (based on the market return) from the actual return on a security over a specific period of time, typically in response to a specific event or announcement. Therefore, the correct definition is A: actual return on a security minus the market rate of return on the same date.

The Abnormal Return in an Event Study Is Described as The