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 ?
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.
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.
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.
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.
Three asterisks indicate that the abnormal return is significant at the 1 percent level (highly significant), two asterisks at the 5 percent level, and one asterisk at the 10 percent level.
They observe that, in the case of upgrades, there is a positive abnormal return in the eleven months preceding the adjustment.
For a given security, the abnormal return in each of the trading days around the time of the announcement is defined as the residual.
In addition, we also explored whether such event would lead to any abnormal return (AR) for the company.
The standard event study methodology gives us significant abnormal return on 9 days.
The study found that stocks that have the most hedge fund ownership (in the top 25%) see, on average, an abnormal return of 0.
The abnormal return is directly related to the change in a firm's market capitalization.
i,t] is the abnormal return of asset i in period t and 1/n [[summation].