The following are the daily returns for both the overall market and for Alpha, Inc. What is the cumulative abnormal return on Alpha, Inc., stock for these five days?
$\begin{array}{lrr}
\text { Date } &\text { R(m)}& \text { Alpha }\
24-\text { oct } & 1.508 & 1.308 \
25 \text {-oct } & -.408 & .208 \
26 \text {-oct } & -.108 & .508 \
27 \text {-oct } & .308 & -.208 \
28-0 c t & 608 & -508
\end{array}$
A)-.8%
B)-.6%
C)-.1%
D).2%
E).5%

Question

Quizplus · Accepted Answer

The cumulative abnormal return (CAR) for Alpha, Inc. is calculated by summing the differences between Alpha's daily returns and the market's daily returns over the given period. The calculation is as follows:Day 1: $1.308 - 1.508 = -0.2\%$Day 2: $0.208 - (-0.408) = 0.616\%$Day 3: $0.508 - (-0.108) = 0.616\%$Day 4: $-0.208 - 0.308 = -0.516\%$Day 5: $-0.508 - 0.608 = -1.116\%$Adding these differences: $-0.2\% + 0.616\% + 0.616\% - 0.516\% - 1.116\% = -0.6\%$Therefore, the cumulative abnormal return on Alpha, Inc. stock for these five days is -0.6%.

The Following Are the Daily Returns for Both the Overall