Over the past 5 days, the common stock of Taylor Mfg

Finance Jan 24, 2021

Over the past 5 days, the common stock of Taylor Mfg. had daily returns of 0.3,-0.2, 0.3, 0.4, and 0.2 percent, respectively. For the same 5 days, the market had daily retums of 0.2. 0.4, 0.5, 0.5, and 0.3 percent, respectively. What is the cumulative abnormal return on Taylor Mfg stock for this time period?

Expert Solution

Taylor Mfg Return (Rt)	Market return (Rm)
0.3%	0.2%
-0.2%	0.4%
-0.3%	-0.5%
0.4%	0.5%
0.2%	0.3%

Taylor Mig Return (Rt)	Market return (Rm)	Abnormal Returns (Rt - Rm)	Cumulative Abnormal Returns
0.3%	0.2%	0.1%	0.1%
-0.2%	0.4%	-0.6%	-0.5%
-0.3%	-0.5%	0.2%	-0.3%
0.4%	0.5%	-0.1%	-0.4%
0.2%	0.3%	-0.1%	-0.5%

Cumulative Abnormal Return on Taylor Mfg. = $\sum$ Abnormal Returns

Cumulative Abnormal Return on Taylor Mfg. = 0.1% - 0.6% + 0.2% - 0.1% -0.1%

Cumulative Abnormal Return on Taylor Mfg. = -0.5%

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