Abnormal Return


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Abnormal Return

The difference between the expected return and the actual return on an investment. Abnormal returns may be either positive or negative; indeed an abnormal return may be negative even if the actual return is positive. That is, suppose the expected return on an investment is 7% and the actual return is 5%. While the investor has 5% more than he/she had when he/she started, the abnormal return is still -2%. On the other hand, if the expected return is 5% and the actual return is 9%, then there is a positive abnormal return of 4%. One may use an abnormal return to gauge the accuracy of various asset pricing models.
References in periodicals archive ?
Based on the market model, abnormal monthly returns were calculated using both the buy-and-hold return and cumulative abnormal return methods for each firm.
The magnitude of abnormal return at the time of event is a measure of the impact of the event on the firm and its clients.
Abnormal return represents the gain or loss for shareholders, which could be explained by many factors, including an M&A transaction.
The abnormal return is the deviation from these predictions during an "event window" surrounding the event of interest.
They reported a statically insignificant negative abnormal return (ARR of -0.
The number of tables and panels quickly becomes overwhelming unless we limit our attention to a modest number of benchmarks for what constitutes an abnormal return.
The abnormal return of firm i and event date t is defined as the difference of the realized return and the expected return given the absence of the event.
In contrast, Miyazaki and Morgan (2001), using a different combination of companies, estimation periods, and announcement windows, did not find significant negative abnormal returns and found a significant positive abnormal return for one window.
The method is based on the assumed occurrence of an abnormal return after a particular event.
AB RET 20 is the abnormal return over the period from trading day 1 to trading day 20 after the IPO date, with a median of 3.
Thus, the abnormal return provides an estimate of the future earnings generated by the event (Geyskens, Gielens and Dekimpe, 2002).
Like Roberts, we find large and significant effects for geographic clients; firms located in Illinois realized a 4 percent abnormal return compared to those in Louisiana in the immediate aftermath of Livingston's resignation.