Abnormal returns


Also found in: Acronyms, Wikipedia.

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 ?
Consistent with this interpretation, returns within this "Undefined Growth" subset are extremely low: 5-year buy-and-hold abnormal returns (BHARs) have an average of -73% and a median of -93%.
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).
Abnormal returns will be associated with the event studied if the intercepts in the regressions are economically and statistically significant.
We computed the abnormal returns using the S&P 500 as the benchmark index because the broader market is more representative of investors' sentiments than the DJIA (Manuela and Rhoades 2013).
Unlike other authors, Linciano finds weak, negative abnormal returns for downgrades in the window between one day before and one day after the announcement.
Acquisitions that concentrated on increasing the diversity of the business earned the highest abnormal returns.
Abnormal Returns (AR) upon return of Chairman and General Manager
Suspecting a shift in beta caused by 9-11, we test whether the abnormal returns obtained for the event window It = -5, .
Event studies usually "estimate abnormal returns at and around the time of some event relating to the shares concerned, for example, the announcement of a rights issue or a takeover bid" [Armitage 1995, p.
The first work identified that accrual anomaly is different than post-earnings announcement drift (the tendency for the cumulative abnormal returns of an asset to accompany an earnings surprise for various days after its announcement, due to an overreaction of the market to the result disclosed).
While daily abnormal returns are a bit noisier, the cumulative effect over three trading days is abundantly clear.
Standardized cumulative abnormal returns can then be aggregated using the individually standardized abnormal returns for each firm