ALLGO announced at Time t that it was acquiring DoLittle Industries.There were no other announcements affecting these firms.ALLGO's stock had daily returns of +0.1,+0,−0.5,−0.2,+0.1 for Time_{t − 2} to Time_{t + 2},respectively.The daily returns on the market were −0.1,+0.2,+0.3,−0.2,and +0.2 for Time_{t − 2} to Time_{t + 2},respectively.What is the cumulative abnormal return for these 5 days? A) −0.7 B) −0.9 C) −0.5 D) −0.8 E) −0.3

Question

Quizplus · Accepted Answer

CAR = [0.1 − (−0.1)] + (0 − 0.2)+ (−0.5 − 0.3)+ [−0.2 − (−0.2)] + (0.1 − 0.2)=−0.9

ALLGO Announced at Time T That It Was Acquiring DoLittle