Assume today is an earnings announcement day for a firm.For the day,the firm's return was .8 percent,while the risk-free daily rate was .01 percent and the market rate of return was 1.1 percent.The firm's industrial class returned 1.2 percent on average for the day.What was the firm's abnormal return for the day?
A).8 percent
B).79 percent
C)−.3 percent
D)−.4 percent
E)−.39 percent

Question

Quizplus · Accepted Answer

The abnormal return is calculated as the firm's return minus the expected return. The expected return can be approximated by the market return or industry return. Using the market return: Abnormal Return = Firm's Return - Market Return = 0.8% - 1.1% = -0.3%.

Assume Today Is an Earnings Announcement Day for a Firm