Q10. Examine the Figure below, which shows cumulative abnormal returns both before and after dates in which insiders buy or sell shares in their firms. How do you interpret these figures?

11:58 8 0 0 . ONall 64% Seminar Questions Market E . . . 1x = 0.2% +1 .4 7 M Ty = - 0.1% + 0 .6 7M Using the data, which company won the court case? Q9 Investors expect the market rate of return in the coming year to be 12%. T-Bills rate is 4% and stock Y has a beta of 0.5. The market value of its outstanding equity is $100m a. Using the CAPM what is your guess for the rate of return of the stock? + b. If next year the market return is 10% what is your best guess the return of Y? 0.04 0.03 -NISSIM -..... 0.02 Cumulative Daily Average Prediction Errors 0.01-.....4. 0.00 -2 -0.01---...... Sales Purchases -0.02 + -200 -100 100 200 300 Event Day Relative to Insider Trading Day Fig. 1. Cumulative daily average prediction errors from 199 days before to 300 days after the insider trading day, for a portfolio of 769 firms traded by insiders during 1975 to 1981, separated by sale and purchase transactions, 0.01-..........." 0.00 Cumulative Daily Avera -0.01- Sales Purchases -0.02- -200 -100 100 200 300 Event Day Relative to Insider Trading Day Fig. 1. Cumulative daily average prediction errors from 199 days before to 300 days after the insider trading day, for a portfolio of 769 firms traded by insiders during 1975 to 1981, separated by sale and purchase transactions. Q11- Distinguish the three forms of market efficiency. O <