ved the cumulative abnormal returns graphed below surrounding the announcement of a new CEO for all publicly traded frms in the US from 1990 to 2020. The average CAR is plotted relative to the event date (0 on the figure). Chart A uses the CAPM to calculate expected returns Chart Buses the Fama-French 3-factor Model to calculate expected returns. Based on this evidence, what can we conclude about market efhiclency Chart A Chart B 4.00% 5.00% 3.00% 4.00% 200% 3.00% 1.00% 1.00% 0.00% 0.00%- -12 -8 -4 8 12 -12 -8 4. 12 Looking at Chart A, we can conclude that the market is definitely efficient, because there is no change in CAR after the event Looking at Chart B, we can conclude that the market is definitely inefficient, because the CAR continues to increase after the event We can conclude nothing about efficiency because of the joint-hypothesis problem We can conclude both a, and b. are true O0O
ved the cumulative abnormal returns graphed below surrounding the announcement of a new CEO for all publicly traded frms in the US from 1990 to 2020. The average CAR is plotted relative to the event date (0 on the figure). Chart A uses the CAPM to calculate expected returns Chart Buses the Fama-French 3-factor Model to calculate expected returns. Based on this evidence, what can we conclude about market efhiclency Chart A Chart B 4.00% 5.00% 3.00% 4.00% 200% 3.00% 1.00% 1.00% 0.00% 0.00%- -12 -8 -4 8 12 -12 -8 4. 12 Looking at Chart A, we can conclude that the market is definitely efficient, because there is no change in CAR after the event Looking at Chart B, we can conclude that the market is definitely inefficient, because the CAR continues to increase after the event We can conclude nothing about efficiency because of the joint-hypothesis problem We can conclude both a, and b. are true O0O
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
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Transcribed Image Text:Tou have observed the cumulative abnormal returns graphed below surrounding the announcement of a new CEO for all publicly traded frms in the
US from 1990 to 2020. The average CAR is plotted relative to the event date (0 on the higure). Chart A uses the CAPM to calculate expected returns
Chart Buses the Fama-French 3-factor Model to calculate expected returns. Based on this evidence, what can we conclude about market efficlency
Chart A
Chart B
4.00%
5.00%
3.00%
4,00%
3,00%
200%
200%
1.00%
1.00%
0.00%
0.00%
-12
-8
-4
8.
12
-12
-8
-4
4.
8
12
O Looking at Chart A, we can conclude that the market is definitely efficient, because there is no change in CAR after the event
O Looking at Chart B, we can conclude that the market is definitely inefficient, because the CAR continues to increase after the event
We can conclude nothing about efficiency because of the joint-hypothesis problem
We can conclude both a. and b. are true
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