Question: Column (A) in Table 13.1 shows the monthly return on the British FTSE 100 index from June 2013 through January 2015. Columns (B) and (C)

Column (A) in Table 13.1 shows the monthly return on the British FTSE 100 index from June 2013 through January 2015. Columns (B) and (C) show returns on the stocks of two firms-Executive Cheese and Paddington Beer. Both firms announced their earnings in January 2015. Calculate the average abnormal return of the two stocks during the month of the earnings announcement.

TABLE 13.1

ExecutivePaddington Month Market Retum Cheese Return Beer Return Jun-13 Jul -3.2 6.1 2.0 0.4 2.7 -9.2 7.3 -6.7 0.5 7.3 -4.9 1.8 -5.0 5.6 -5.7 4.5 0.5 -0.7 -0.8 2.2 -6.4 -0.8 3.4 -2.3 -5.6 6.5 -3.1 0.8 4.2 Sep Oct Nov 1.4 -3.5 4.6 -3.1 2.8 1.0 Jan-14 4.0 -4.2 1.3 0.9 ar May Jun Jul -0.2 1.3 -2.9 1.6 2.4 -0.9 2.3 Oct 2.7 -2.3 4.0 Nov 5.7 Jan-15

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