The abnormal return in an event study is described as:
A)the return earned on the day of announcement for the stock.
B)the excess return earned on the day of announcement for the stock.
C)the total return earned for the investment holding period.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

The abnormal return is calculated by subtracting the expected return from the actual return on the day of the event. The expected return is estimated based on the stock's historical performance and overall market trends. Therefore, the abnormal return represents the excess return earned on the day of the event, beyond what would have been expected.

The Abnormal Return in an Event Study Is Described As