FashionBunker (FBK) is a high-end fashion retailer, specialises in Australian designer brands. The company has moderate presence through physical stores but has built a strong digital brand, with sales extending to the US market and endorsements from international celebrities as well as Australian influencers. Using the last 2 years of daily data, the company is reported to have a beta of 1.3 compared to the ASX200. The annual risk-free interest rate is 2% and the expected rate of return on the market is 12% p.a. The price of FBK at the beginning of the year (2020) was $20. A dividend is expected to be paid of $0.50 per share at the end of year. Question 32 Market Efficiency (6 marks) On the 4th of April, the company revealed strong earnings through their quarterly report announcement. This high level of earnings far exceeded the market consensus prior to the announcement. With reference to the below price information, answer the following (Rm = Market Return). The current risk-free rate is 2% annually (0.005% daily). Please calculate everything at the daily rate: a. Calculate the Abnormal Returns for the 5 days around the announcement, expressed as a percentage rounded to 1 decimal place. Show the working process for the Abnormal Return on 3rd, 4th and 5th of April, answers to the other two days without working are accepted. (3 marks) b. What kind of market efficiency do your calculations point to? Why? (3 marks) Date Change Open High Low Close Volume Rm AR 6/04/2020 0.5% $18.41 $18.61 $18.16 $18.26 6040031 0.3% 5/04/2020 1.8% $18.35 $18.48 $18.17 $18.17 907027 0.7% 4/04/2020 -0.7% $17.78 $17.90 $17.75 $17.85 9062573 -0.4% 3/04/2020 6.2% $17.98 $18.01 $17.83 $17.98 5885893 -0.5% 2/04/2020 3.9% $16.80 $17.05 $16.62 $16.92 1429470 0.4%