QUESTION II: THE S&P 500 INCLUDSION ANOMALY. Mean cumulative abnormal return 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0% -0.50% High arbitrage risk ....... Low arbitrage risk -2-1 0 123456789 10 11 12 13 14 15 16 17 18 19 20 Trading day relative to addition announcement Fig. 2.4 Mean Cumulative Abnormal Returns For Stocks Added To the S&P 500, By Level Of Imperfect Arbitrage Risk. This figure, which we discussed in the lecture, plots the mean cumulative abnormal returns of two groups of stocks added to the S&P 500. The first group includes stocks with high arbitrage risk, while the other group includes stocks with low arbitrage risk. The horizontal axis is the trading day relative to the addition announcements. 1. (2 points) What is the main finding of this Figure? 2. (3 points) What is the explanation for the finding?
QUESTION II: THE S&P 500 INCLUDSION ANOMALY. Mean cumulative abnormal return 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0% -0.50% High arbitrage risk ....... Low arbitrage risk -2-1 0 123456789 10 11 12 13 14 15 16 17 18 19 20 Trading day relative to addition announcement Fig. 2.4 Mean Cumulative Abnormal Returns For Stocks Added To the S&P 500, By Level Of Imperfect Arbitrage Risk. This figure, which we discussed in the lecture, plots the mean cumulative abnormal returns of two groups of stocks added to the S&P 500. The first group includes stocks with high arbitrage risk, while the other group includes stocks with low arbitrage risk. The horizontal axis is the trading day relative to the addition announcements. 1. (2 points) What is the main finding of this Figure? 2. (3 points) What is the explanation for the finding?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:QUESTION II: THE S&P 500 INCLUDSION ANOMALY.
Mean cumulative abnormal return
5.50%
5.00%
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0%
-0.50%
High arbitrage risk ....... Low arbitrage risk
-2-1 0 123456789 10 11 12 13 14 15 16 17 18 19 20
Trading day relative to addition announcement
Fig. 2.4 Mean Cumulative Abnormal
Returns For Stocks Added To the S&P
500, By Level Of Imperfect Arbitrage
Risk.
This figure, which we discussed in the lecture, plots the mean cumulative abnormal returns of
two groups of stocks added to the S&P 500. The first group includes stocks with high arbitrage
risk, while the other group includes stocks with low arbitrage risk. The horizontal axis is the
trading day relative to the addition announcements.
1. (2 points) What is the main finding of this Figure?
2. (3 points) What is the explanation for the finding?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education