Question

Ross Co., Westerfield, Inc., and Jordan Company announced a new agreement to market their respective products in China on July 18 (7/18), February 12 (2/12), and October 7 (10/7), respectively. Given the information below, calculate the cumulative abnormal return (CAR) for these stocks as a group. Assume all companies have an expected return equal to the market return. (Negative values should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 1 decimal place.)

Ross Co.				Westerfield, Inc.				Jordan Company
Date	Market Return	Company Return		Date	Market Return	Company Return		Date	Market Return	Company Return
7/12	–.2	–.4		2/8	–.7	–.9		10/1	.3	.5
7/13	.1	.3		2/9	–.8	–.9		10/2	.2	.8
7/16	.6	.8		2/10	.6	.4		10/3	.9	1.3
7/17	–.4	–.2		2/11	.8	1.0		10/6	–.1	−.5
7/18	–1.9	1.3		2/12	–.1	.1		10/7	–2.4	−.5
7/19	–.8	–.6		2/15	1.3	1.4		10/8	.3	.3
7/20	–.9	–1.0		2/16	.7	.7		10/9	–.5	−.4
7/23	.6	.4		2/17	–.1	.0		10/10	.1	−.1
7/24	.1	.0		2/18	.5	.4		10/13	–.2	−.6

Answer 1

The Abnormal return is calculated by reducing market return from individual stock return
Days from announcement	Abnormal returns (Ri-Rm)			Sum	Average abnormal return [Sum/3)	Cumulative average residual
	Ross Co	Westerfield Inc	Jordan Company
-4	0.20	0.20	-0.20	0.20	0.07	0.07
-3	-0.20	0.10	-0.60	-0.70	-0.23	-0.17
-2	-0.20	0.20	-0.40	-0.40	-0.13	-0.30
-1	-0.20	-0.20	0.40	0.00	0.00	-0.30
0	-3.20	-0.20	-1.90	-5.30	-1.77	-2.07
1	-0.20	-0.10	0.00	-0.30	-0.10	-2.17
2	0.10	0.00	-0.10	0.00	0.00	-2.17
3	0.20	-0.10	0.00	0.10	0.03	-2.13
4	0.10	0.10	0.40	0.60	0.20	-1.93
The sum is the abnormal return of each of the stock
Average abnormal return is calculated by dividing Sum by 3
The cumulative abnormal return is calculated by adding average abnormal return to the previous day's average abnormal return