Cumulative Abnormal Returns
- Several celebrated investors and stock pickers frequently mentioned in the financial press have recorded huge returns on their investments over the past two decades. Does the success of these particular investors invalid tae the EMH? Explain.
- Delta, United, and American Airlines announced purchases of planes on July 18 (7/18), February 12 (2/12), and October 7 (10/7), respectively. Given the following information, calculate the cumulative abnormal return (CAR) for these stocks as a group. Graph the result and provide an explanation. All of the stocks have a beta of 1, and no other announcements are made.
(CAR) means Cumulative Abnormal Returns
Delta United American
| Date | Market Return | Company return | Date | market Return | company return | date | market ret | Company r |
| 7/12 | -3 | -5 | 2/8 | -9 | -11 | 10/1 | .5 | .3 |
| 7/13 | .0 | .2 | 2/9 | -1.0 | -1.1 | 10/2 | .4 | .6 |
| 7/16 | .5 | .7 | 2/10 | .4 | .2 | 10/3 | 1.1 | 1.1 |
| 7/17 | -.5 | -.3 | 2/11 | .6 | .8 | 10/6 | .1 | -.3 |
| 7/18 | -2.2 | 1.1 | 2/12 | -.3 | -.1 | 10/7 | -2.2 | -.3 |
| 7/19 | -.9 | -.7 | 2/15 | 1.1 | 1.2 | 10/8 | .5 | .5 |
| 7/20 | -1.0 | -1.1 | 2/16 | .5 | .5 | 10/9 | -.3 | -.2 |
| 7/23 | .7 | .5 | 2/17 | -.3 | -.2 | 10/10 | .3 | .1 |
| 7/24 | .2 | .1 | 2/18 | .3 | .2 | 10/13 | .0 | -.1 |
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