On June 16, 2017, Amazon announced that it would buy Whole Foods Market, Inc. Evaluate Amazons stock performance, both in short- and long-terms after the announcement. Specifically, do the followings:

Short-Term: Compute the cumulative abnormal return of Amazon around the announcement day. Use the event period (-1,+1); that is, one day prior to and after the announcement day.

Question 1. Did the stock market like the announcement of acquisition? Explain why/why not.

Question 2. Is the result consistent with empirical evidence provided in this chapter? Explain why/why not.

Long-Term: Compute:

1) The one-year post announcement abnormal return of Amazon (i.e., cumulative abnormal return from the announcement day to one year later), and

2) The Sharpe ratios of Amazon and S&P500, measured over one year period after the announcement.

Question 3. Provide your interpretation of the results has Amazon performed better or worse than the market in the long run? Provide separate interpretations for the cumulative abnormal return and Sharpe ratios. In addition to your work/calculation, you may choose to provide a figure(s), chart(s), etc., to support your conclusion.

Obtain historical daily data on Amazon and S&P500 index prices from Yahoo! Finance. Use returns on the S&P500 index as benchmark (i.e., market) returns. Obtain data on risk-free rates from Ken Frenchs website, Federal Reserve Bank at St. Louis, Bloomberg, etc. You must calculate/estimate Amazons beta. In other words, do not use the beta provided by Yahoo! Finance or similar websites.