The abnormal return in an event study is described as the:
A)total return earned on a security on the day of an announcement.
B)daily return on a security minus the daily return on the overall market.
C)average return on a security for the 7-day period surrounding an announcement.
D)average return on a security for the 7-day period surrounding an announcement minus the average return on the security for the past year.
E)daily return on a security on the announcement date minus the risk-free rate of return.

Question

Quizplus · Accepted Answer

The abnormal return in an event study is the difference between the actual return of a security on a specific day and the expected return, which is often measured as the return on the overall market or a benchmark. This captures the impact of an event (like an announcement) on the security's price, isolating it from broader market movements.

The Abnormal Return in an Event Study Is Described as The