An event study of merger announcements tracks what happens to the targets returns around announcement dates. Merger announcements occur sometimes after the close of the market, so reactions to such announcements may take place in the next trading day. The pattern is shown in the figure below. Take the first row of the table, for example: it states that average abnormal returns (where abnormal return is measured as the targets stock return minus the market return) across targets for the 10th trading day preceding the merger announcement is 11 basis points, or 0.11%. Discuss whether merger conveys good news, bad news or no news for the target. Define the null as the merger does not carry any news, and the alternative hypothesis as the merger conveys good news. Please write down the hypothesis and test it. Then discuss whether markets are efficient in incorporating the information in the merger announcement.