(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 into 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 returns across the firms for the sth 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 I-stat 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 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. (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 into 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 returns across the firms for the sth 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 I-stat 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 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