QQAG has a beta of 1.7. The annualized market return yesterday was 13%, and the risk-free rate is currently 3%. You observe that QQAG had an annualized return yesterday of 20%. Assuming that markets are efficient, this suggests that
A) bad news about QQAG was announced yesterday.
B) good news about QQAG was announced yesterday.
C) no significant news about QQAG was announced yesterday.
D) interest rates rose yesterday.
E) interest rates fell yesterday.

Question

Quizplus · Accepted Answer

AR = 20% − (3% + 1.7 (10%)) = 0.0%. A positive abnormal return suggests that there was firm-specific good news and a negative abnormal return suggests that there was firm-specific bad news.

QQAG Has a Beta of 1