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Cumulative Abnormal Return

   Also found in: Wikipedia 0.46 sec.
Cumulative abnormal return (CAR)
Sum of the differences between the expected return on a stock (systematic risk multiplied by the realized market return) and the actual return often used to evaluate the impact of news on a stock price.

Cumulative Abnormal Return
In stocks, the sum of all the differences between the expected returns and the actual returns up to a given point in time. Since the expected return is computed by an asset pricing model, the cumulative abnormal return may be used to determine how accurate the model is. More often, it is used to investigate the affect extraneous events have on stock prices.


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Finally, trading volume, on average, does increase significantly for a few days after the announcement date, supporting positive cumulative abnormal returns observed over two time periods, as shown at the bottom of Table 1.
The cumulative abnormal return (CAR) for each security j is calculated by summing average abnormal returns over the event period as follows:
These results were reproduced in tables 4 and 5 where differences in cumulative abnormal return (CAR) over three event periods were estimated.
 
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