Question

Ross Co., Westerfield, Inc., and Jordan Company announced a new agreement to market their respective products in China on July 18 (7/18), February 12 (2/12), and October 7 (10/7), respectively. Given the information below, calculate the cumulative abnormal return (CAR) for these stocks as a group. Assume all companies have an expected return equal to the market return. (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.)

Ross Co.				Westerfield, Inc.				Jordan Company
Date	Market Return	Company Return		Date	Market Return	Company Return		Date	Market Return	Company Return
7/12	-0.6	-0.3		2/8	-0.6	-0.3		10/1	1.4	0.6
7/13	1.2	0.3		2/9	-0.7	-0.3		10/2	1.3	0.6
7/16	0.4	0.3		2/10	0.4	0.6		10/3	0.7	1.3
7/17	-0.6	-0.2		2/11	0.6	2.1		10/6	-0.1	-0.7
7/18	-0.8	1.3		2/12	-0.1	0.1		10/7	-2.2	-0.7
7/19	-1.9	-0.1		2/15	1.2	1.9		10/8	1.2	0.6
7/20	-0.9	-0.3		2/16	0.7	0.5		10/9	-0.5	-0.6
7/23	0.6	0.4		2/17	-0.1	0		10/10	0.1	-0.1
7/24	1.2	0		2/18	1.6	0.4		10/13	-0.1	-0.6

	Abnormal returns (Ri – R­M) Days from announcement Ross W’field Jordan Sum Average abnormal return Cumulative average residual −4 −3 −2 −1 0 1 2 3 4

Answer 1

Answer:

Abnormal returns (Ri R-M) Average abnormal return average residual Days from Cumulative Ross W'field Jordan Sum announcement -4 0.3 0.3 -0.8 -0.2 -0.1 -0.1 -3 -0.4 -0.9 0.4 -0.7 -1.2 -0.5 -2 -0.1 0.2 0.6 0.7 0.2 -0.2 -1 0.4 1.5 -0.6 1.3 0.4 0.2 0 2.1 0.2 1.5 3.8 1.3 1.5 1 1.8 0.7 -0.6 1.9 0.6 2.1 2 0.6 -0.2 -0.1 0.3 0.1 2.2 3 -0.2 0.1 -0.2 -0.3 -0.1 2.1 -1.2 -1.2 -0.5 -2.9 -1.0 1.1

The above excel with 'show formula' along with base data are as below:

A C E G H Westerfield, Inc 1 Ross Co Jordan Company Market Market Market Company Return Return Company Company 2 Date 3 IDate Date Return Return Return Return -0.6 -0.3 -0.3 -0.3 0.6 0.6 1.3 -0.7 -0.7 07/12 2/8 10/1 -0.6 4 1.4 0.3 07/13 2/9 0.7 0.4 0.6 10/2 1.2 0.4 1.3 5 0.3 0.6 07/16 2/10 10/3 0.7 6 -0.2 -0.6 07/17 2/11 10/6 0.1 7 10/7 07/18 2/12 -0.8 13 -0.1 0.1 2.2 0.6 -0.6 -0.1 -0.6 -1.9 -0.9 0.6 07/19 2/15 10/8 -0.1 1.2 1.9 1.2 10/9 07/20 2/16 -03 07 0.5 0.5 10 07/23 2/17 10/10 0.4 -0.1 0 0.1 11 10/13 07/24 12 2/18 0 1.6 0.4 0.1 12 Abnormal returns (Ri R-M) 14 Days from Cumulative Velage abnormal return average residual W'field Jordan Ross Sum ouncement ... 15 -C4- B4 EK4- J4 - D16 + C16+ B16 -E16/ 3 - E17/3 =F16 - G16 + F17 G17+ F18 G18+F19 - G19 + F20 |G20+F21 =G21 + F22 -4 16 G4-F4 K5-J5 3 =C5-B5 G5-F5 =D17+C1 7+B17 17 D18 C18+B18 - D19+ C19+ B19 D20 C20+B20 - E18/ 3 - C6- B6 -G6- F6 K6-J6 18 =K7-J7 =K8-J8 K9-J9 K10-J10 =E19 / 3 C7-87 =C8- B8 C9-B9 -1 G7-F7 19 20 0 G8- F8 - E20/3 21 1 D21+C21+ B21 G9-F9 E21/3 D22 C22+B22 - E22/3 - E23 / 3 22 2 =C10-B10 G10-F10 - C11 - B1 1 -G11 - F11 - G12 - F12 K11 - J11 K12 - J12 23 3 -D23+C23 + B23 =G22+F23 - D24 + C24 + B24 -G23+ F24 24 4 =C12-B12 - E24/ 3 25