Question
1)The common stock of Glick Toys Inc. has a daily standard deviation of stock price returns of 75 basis points (0.75 percent). On a certain
1)The common stock of Glick Toys Inc. has a daily standard deviation of stock price returns of 75 basis points (0.75 percent). On a certain day, call it Day 0, Glick Toys announces the launch of a new product line. You have been asked to evaluate whether the announcement was well received by the market. You decide to take the skills you learned in Core Finance and Data Analysis and perform an event study. The expected return on the market portfolio is two basis points a day (0.02 percent). An abnormal return is considered statistically significant if it is larger than two standard deviations in absolute value.
Day relative to announcement Stock price
-4 30.00
-3 30.33
-2 30.48
-1 30.30
0 31.21
1 31.52
2 31.27
3 31.14
Based on the stock price movement, what can you conclude about the announcement, and what does it suggest about market efficiency?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started