Over the past 5 days, the common stock of Chelsee & Company had daily returns of 0.2, -0.3, -0.7, 0.1, and 0.2 percent, respectively. For the same 5 days, the market had daily returns of 0.2, 0.1, -0.3, 0.0, and 0.3 percent, respectively. What is the cumulative abnormal return on Chelsee stock for this time period?
A) -0.8 percent
B) -0.4 percent
C) 0.0 percent
D) 0.2 percent
E) 0.4 percent

Question

Quizplus · Accepted Answer

The cumulative abnormal return is calculated by subtracting the market return from the stock return for each day and then summing these differences: (0.2-0.2) + (-0.3-0.1) + (-0.7+0.3) + (0.1-0.0) + (0.2-0.3) = 0 - 0.4 - 0.4 + 0.1 - 0.1 = -0.8 percent.

Over the Past 5 Days, the Common Stock of Chelsee