Question

1. Suppose you are trying to determine the impact of news that a settlement has been reached in a lawsuit against GE. Based on the past 250 days and using CAPM, you have estimated that the annual alpha (α) is 0.8% and beta (β) is 1.1. It is known that the annual risk-free rate is 3% and the annual market return is 12%. If over a three day window (-1,+1) around the release of this news the stock jumped 9%, what is GE’s cumulative abnormal return?

Answer 1

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