[LBYACST] Event Study

Represents the difference between a stock’s actual return and its expected return over a certain period

• Cumulative Abnormal Return

• Average Abnormal Return

• Abnormal Return

• Cumulative Average Abnormal Return

How to compute for Abnormal Return?

• Actual Return + Expected Return

• Actual Return - Expected Return

• Expected Return - Actual Return

• Actual Return × Expected Return

Which two models rely on assumptions based on investor's behavior and not solely on statistics?

• Constant Mean Return Model

• Capital Asset Pricing Model

• Arbitrage Pricing Theory

• Market Model

Which model assumes that the return on a security over a given period is composed of a constant mean return (μi) and a disturbance term (ζit​)?

• Arbitrage Pricing Theory

• Market Model

• Capital Asset Pricing Model

• Constant Mean Return Model

Which statistical model connects the return of a given security to the return of a market portfolio?

• Market Model

• Capital Asset Pricing Model

• Constant Mean Return Model

• Arbitrage Pricing Theory

Represents the average change in the stock prices of multiple companies compared to their expected returns.

• Cumulative Abnormal Return

• Average Abnormal Return

• Abnormal Return

• Cumulative Average Abnormal Return

Which of the following choices influence stock prices?

• Rumors

• Breakfast Menu

• Moon Phases

• Brand Colors

Helps to understand the cumulative effect of an event on stock prices over the event window.

• Abnormal Return

• Average Abnormal Return

• Cumulative Average Abnormal Return

• Cumulative Abnormal Return

Captures the total impact of an event over a specific time period by summing up the ARs.

• Abnormal Return

• Cumulative Abnormal Return

• Average Abnormal Return

• Cumulative Average Abnormal Return

Possibly the simplest of all models of stock returns

• Capital Asset Pricing Model (CAPM)

• Naive Benchmark

• Arbitrage Pricing Theory (APT)

• Fama-French Three-Factor Model