12. Abnormal returns (S12.3) The second column in Table 12.2 shows the monthly return on the British FTSE 100 index from January 2015 through July 2017. The remaining columns show returns on the stocks of two firms—Executive Cheese and Paddington Beer. Both firms announced their earnings in July 2017. Calculate the average abnormal return of the two stocks during the month of the earnings announcement. The earnings of one of these stocks slightly disappointed investors and the earnings of the other were slightly better than expected. Which was which?

⟩ TABLE 12.2 See Problem 16. Rates of return in percent per month.

Chapter 12 Efficient Markets and Behavioral Finance 365