Problem 7-5 Ross Co., Westerfield, Inc., and Jordan Company announced a new agre

Question

Problem 7-5

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. (Negative values should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.)

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. (Negative values should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.)

Explanation / Answer

Abnormal returns (Ri – R­M)

Average abnormal return

Cumulative average residual

Abnormal returns (Ri – R­M)

Days from announcement Ross W’field Jordan Sum

Average abnormal return

Cumulative average residual

-4 0.1 0.1 0.1 0.3 0.1 0.1 -3 -0.6 0.2 0.2 -0.2 -0.1 0.0 -2 0.8 0.8 1.2 2.8 0.9 1.0 -1 0.4 1.8 -0.4 1.8 0.6 1.6 0 2.4 0.2 1.1 3.7 1.2 2.8 1 1.2 0.1 -1.2 0.1 0.0 2.8 2 0 0.1 1.3 1.4 0.5 3.3 3 -0.2 0.1 -0.2 -0.3 -0.1 3.2 4 -0.9 -0.9 -0.2 -2 -0.7 2.5

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