Question: Question 1 What is the purpose of differencing a data series prior to estimating its relationship with other variables? Why is this process important to

Question 1

What is the purpose of "differencing" a data series prior to estimating its relationship with other variables? Why is this process important to analyzing economic data sets like GDP?

Question 2

In an event study of the impact of merger announcements on stock prices, what would the "abnormal returns" constitute and how would you calibrate "normal returns"?Explain briefly.

Pls answer Q1&2

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