Dividend omission study. 2 Day cumulative abnormal return is the dependent (Y) v
ID: 3201803 • Letter: D
Question
Dividend omission study. 2 Day cumulative abnormal return is the dependent (Y) variable and the 3 dummy variables provided are the independent (X) variables. Provide a short plausible explanation, based on your knowledge of finance, for why each estimated coefficient sign is positive or negative.
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept -0.033571429 0.040065406 -0.837915603 0.490259239 -0.205958956 0.138816099 -0.205958956 0.138816099 Bank dummy 0.050542857 0.043889453 1.151594603 0.368566831 -0.138298217 0.239383932 -0.138298217 0.239383932 Other info reported 0.214071429 0.06206906 3.448923342 0.07476269 -0.05299018 0.481133037 -0.05299018 0.481133037 Earnings announced soon after -0.095442857 0.043889453 -2.174619429 0.161681638 -0.284283932 0.093398217 -0.284283932 0.093398217Explanation / Answer
Ans - The negative coefficient implies that there is a inverse relationship between the variable (Earnings announced soon soon after) to that of return. This will happen when the Earnings of the company is not as per the expectations so the market discounts that into the stock price resulting into the decrease in return or dip in stock price.