First, we will use the historical monthly returns of Alibaba and Hangseng Index from Jan 2020 to June 2023 (data before the event) to estimate the beta.

- On worksheet "Estimate beta", I have obtained the monthly returns of Alibaba, Hangseng Index (as a proxy for market portfolio) from Yahoo Finance, and obtained HK monthly risk-free rate from Hong Kong Monetary Authority. I have also computed the excess returns of Alibaba and index.

- Please use the data provided and run a market model regression to estimate the beta of Alibaba.

Second, the event date is July 7, 2023. We will use CAPM to estimate the Cumulative Abnormal Returns (CAR) over a [-10, +10] time window around this event day.

- On worksheet "Event study", I have prepared the daily returns for Alibaba, HangSeng index, and also risk free rate, from Jun 23 to Jul 24. It includes the 10 days before the announcement date, and also 10 days after the announcement date.

- On each day, please use the given returns, and the beta you just estimated, to compute the CAPM implied expected return for Alibaba

E(ri,t) = rf,t + (rm,t rf,t)

- Compute the abnormal return for Alibaba on each day

t = ri,t E(ri,t)

- Accumulate the abnormal returns across the entire event window. i.e.

CARt=10 = t=10 CARt=9 = t=10 + t=9 CARt=8 = t=10 + t=9 + t=8 ... CARt=10 = t=10 + t=9 + ... + t=9 + t=10

- Plot the cumulative abnormal returns. X-axis is the event window from day -10 to day 10. Y-axis is the CAR. Please align the axis position on tick marks.

Important step: Up to here, you have conducted all the filed works for this event study, and now please write a formal report to explain and summarize your findings and analysis. In this report, please also

- Try to assume that your team is currently working in the research department of a financial intuition, and your boss is waiting to see a professional report to explain:

1. Why do you adopt this event study strategy, instead of simply comparing the stock price before and after the event?

2. From the plot of CAR, please also discuss the efficient market hypothesis .

- Please try NOT to simply pile up answers in each step .