(Value vs. Growth, 25 points) How would you infer whether a firm is a value firm or a growth firm based on its book-to-market ratio? List a few characteristics of growth firms that have been discussed in class.

(Stock Split, 25 points) An event study tracks what happens when a firm announces that it will split its stock. (For example, each stock will be broken in two stocks, each worth half of the original price.) The announcement date is day 0 and the study looks at abnormal returns in the 11-day window around announcement dates.

The pattern for a sample of 175 firms announcing stock splits is shown in the table below. Take the first row of the table, for example: it states that average abnormal return across the firms for the 5^th trading day preceding the announcement is +35 basis points, or +0.35%, which is not significantly different from zero, as suggested by a t-stat less than 2.

Relative day	Average abnormal return	t-stat
-5	0.0035	1.02
-4	0.0024	1.13
-3	0.0054	2.85
-2	0.0038	2.28
-1	0.0042	2.11
0	0.0118	4.84
1	0.0100	2.99
2	0.0026	1.30
3	0.0030	1.65
4	0.0018	0.93
5	0.0028	1.68

Discuss whether announcement of stock split conveys good news, bad news or no news. Analyze whether there is leakage of the announcement.