Ross Co., Westerfield, Inc., and Jordan Company announced a new agreement to mar

Question

Ross Co., Westerfield, Inc., and Jordan Company announced a new agreement to market their respective products in China on July 18 (7/18), February 12 (2/12), and October 7 (10/7), respectively. Given the information below, calculate the cumulative abnormal return (CAR) for these stocks as a group. Assume all companies have an expected return equal to the market return. (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.) Ross Co Westerfield, Inc ordan Compan Market Company Market Company -0.7 0.4 Market Company Date Return Return -0.7 -0.7 0.6 2.6 0.1 1.8 Date Return Return 10/1 10/2 10/3 10/6 -0.10.2 10/7 1.70.2 10/8 10/9 -0.51.1 Date Return Return 7/12 7/13 7/16 -0.1 2/8 2/9 2/10 0.7 -0.2 -0.1 -0.6 0.7 0.6 -0.1 7/18 7/19 7/20 7/23 7/24 -2.4 -0.9 0.6 1.7 1.3 2/12 -0.22/15 -0.82/16 1.4 0.7 -0.1 0 10/10 0. -0.1 0.4 10/13 0.1 0.6 0 2/18 2.1

Explanation / Answer

Abnormal Retun = Actual Retun for the stock - Market Return.

Average Abnormal return (AR) = Sum of average abnormal retun / the sample size

Cumulative Average Residual i.e. CARt = ARt + CARt-1

Days from announcement Ross W'field Jordan Sum Average abnormal return Cumulative
average residual -                           4 =-0.7-(-0.1) = -0.60 =-0.7-(-0.1) = -0.60 =0.7-1.9 = -1.20 =(-0.6)+(-0.6)+(-1.2) = -2.40 =-2.4/3 = -0.80 =0+(-0.80) = -0.80 -                           3 =0.3-1.7 = -1.40 =-0.7-(-0.2) = -0.50 =0.7-1.8 = -1.1 =(-1.4)+(-0.5)+(-1.1) = -3.00 =-3.0/3 = -1.00 =-1+(-0.8) = -1.80 -                           2                             0.50                             0.20                       0.60                                                   1.30                              0.43 -                        1.37 -                           1                             0.40                             2.00 -                    0.10                                                   2.30                              0.77 -                        0.60                            -                               1.60                             0.20                       1.50                                                   3.30                              1.10                          0.50                              1                             2.20                             0.40 -                    1.10                                                   1.50                              0.50                          1.00                              2                             0.10 -                           0.70 -                    0.60 -                                                1.20 -                            0.40                          0.60                              3 -                           0.20                             0.10 -                    0.20 -                                                0.30 -                            0.10                          0.50                              4 -                           1.70 -                           1.70 -                    0.50 -                                                3.90 -                            1.30 -                        0.80

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