Abnormal returns


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Abnormal returns

The component of the return that is not due to systematic influences (market-wide influences). In other words, the abnormal returns is the difference between the actual return and that is expected to result from market movements (normal return). Related: excess returns.

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 ?
T-tests were used to determine whether abnormal returns in each case were significantly different from zero (p < 0.
Second, the information hypothesis, assumes that abnormal returns are caused by new, relevant information, leading to a permanent revaluation of the security.
bank mergers, a great deal of variation exists among studies in sample and geographic coverage and period of time over which the market model is estimated and abnormal returns are computed.
The figure below indicates that the KSE-100 Index is more volatile and has recently generated higher abnormal returns.
On average over the 20 events with the largest insured losses, broker stocks earned abnormal returns of 0.
2008) ,however, observed insignificant increase on stock prizes in Indian firms reported insignificant positive abnormal returns in Indian firms (cited by Shahid et al.
Table VI is similar to Table V, but uses buy-and-hold abnormal returns in place of annualized raw returns.
Measurements of additional rate of return used in research are Cumulative Abnormal Returns (CAR) and Buy-and-Hold-Abnormal Returns (BHAR).
Farrell and Frame (1997) found significant negative abnormal returns for the two days following an announcement, but no significant effects on the announcement day (day 0).
Taking into account nineteen M&A cases, the author concluded that in general, the abnormal returns of acquiring banks was significantly negative, while the abnormal returns of the acquired banks was significantly positive.
Abnormal returns will be associated with the event studied if the intercepts in the regressions are economically and statistically significant.
The daily abnormal returns were aggregated over the event window and cumulative abnormal returns were calculated as follows: