You are conducting a cumulative average residual study on the effect of airline companies’ buying new planes. The announcement dates for the purchase of the planes were July 18 (7/18) for Delta, February 12 (2/12) for United, and October 7 (10/7) for American. Construct a cumulative abnormal return (CAR) for these stocks as a group, chart it, and explain it. All stocks have a beta of 1.

Transcribed Image Text:

Delta Market Company United American Market Company Market Company Date Return Return Date Return Return Date Return Return 7/12 -0.3 -0.5 2/8 -0.9 -1.1 10/1 0.5 0.3 7/13 0.0 0.2 2/9 -1.0 -1.1 10/2 0.4 0.6 7/16 0.5 0.7 2/10 0.4 0.2 10/3 1.1 1.1 7/17 -0.5 -0.3 2/11 0.6 0.8 10/6 0.1 -0.3 7/18 -2.2 1.1 2/12 -0.3 -0.1 10/7 -2.2 -0.3 7/19 -0.9 -0.7 2/15 1.1 1.2 10/8 0.5 0.5 7/20 -1.0 -1.1 2/16 0.5 0.5 10/9 -0.3 -0.2 7/23 0.7 0.5 2/17 -0.3 -0.2 10/10 0.3 0.1 7/24 0.2 0.1 2/18 0.3 0.2 10/13 0.0 -0.1