3. You estimate the Fasna-French model for stock XYZ and the betas turn out to b

Question

3. You estimate the Fasna-French model for stock XYZ and the betas turn out to b the year when the market dropes During 06, Agara, = 3.2, ara,1-0.5. ts growth by 3%, what yo by 2%, big finns beat small finns by 4%, and value bea expect the return to the stock to be, on average? The risk-free rate is 3%. ri 1.1% b 4.1% -0,7% d 2.3% 4. During the da y of the earnings announcement the stock of corporation A witn abnormal return of 2.3%. On the day was 1.1%. The standard deviation of the monthly abnormal return is 5.5% the result of the test for the significance of the cumulative abnormal return before the announcement, the abnormal return , what is ssume 22 trading days in a month. T-statistic 2.90, reject the null that the announcement caused no price reac- T-statistic 2.05, the announcement did not have a significant impact on the c Tstatistic 0.19, the ansouncemsent baud no significant impact on the stok a tion b stock price price d T-statistic 2.05, the announcement had a significant impact on the stock price

Explanation / Answer

q3) Return Expected = 3%-(0.6*2-0.2*4+0.5*3) = 1.1%

So, return expected is 1.1%

Option A is Correct

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