Question

Provided no other information and an efficient market, the CAR five days before a dividend announcement...

Provided no other information and an efficient market, the CAR five days before a dividend announcement day, it is most likely to be _______________ .
Select one:
Much greater than zero
Zero
Much smaller than zero

Homework Answers

Answer #1

The correct answer is Much Smaller than Zero

The CAR refers to the Cummulative Abnormal return, When there is new discovery or announcement then on the date of announcement the Cummulative abnormal return will rise substantially on that date. And, before and after the event it will remain flat. Before the announcement, the CAR will show flat value less than zero because of release of negative information but after the announcement, it will remain flat in positive number which will be at the level of price attained on announcemnt date.

Therefore, 5 days before the dividend announcement, CAR will be negative

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If a market is efficient, then the difference between the market value of an investment and...
If a market is efficient, then the difference between the market value of an investment and its cost is: Select one: a. Positive and greater than 1. b. Equal to the risk-free rate of return. c. Equal to the risk premium. d. Zero. e. Equal to the net present value of the cash inflows.
) Which of the following causes a market to be weak-form efficient? Select one: a. Investors...
) Which of the following causes a market to be weak-form efficient? Select one: a. Investors analysing past prices and buying shares they think are more likely to increase than decrease, pushing prices up until the share price reflects any information contained in the pattern of past prices. b. Investors analysing past prices and selling shares they think are more likely to decrease than increase, pushing prices down until the share price reflects any information contained in the pattern of...
16. New England Singers has increased its dividends by 3.7 percent per year for each of...
16. New England Singers has increased its dividends by 3.7 percent per year for each of the past 16 years. Recently, the company has been experiencing very low levels of growth, so market experts and investors anticipated that the firm would announce that it expects dividends to decrease by 1.2 percent per year forever. This morning, New England Singers announced that it expects dividends to decrease by 1.2 percent per year forever, which would be a larger decrease than any...
Inventory Turnover and days’ sales in inventory Kracker Corp., Foodstuff, Inc., and Winston Stores, Inc. are...
Inventory Turnover and days’ sales in inventory Kracker Corp., Foodstuff, Inc., and Winston Stores, Inc. are three grocery chains in the United States. Inventory management is an important aspect of the grocery retail business. Recent balance sheets for these three companies indicated the following merchandise inventory (in millions) information: Kracker Corp. Foodstuff Inc. Winston Stores Cost of merchandise sold $32,850.0 $34,675.0 $35,040.0 Inventory, beginning of year 1,908.9 2,131.8 1,582.1 Inventory, end of year 1,871.1 2,048.2 1,489.9 a. & b. Determine...
Consider the market of organic eggs. It now faces two changes: on the one hand, people...
Consider the market of organic eggs. It now faces two changes: on the one hand, people become more concerned about antibiotics in animal feed. On the other hand, due to environmental degradation, hens now lay fewer eggs per day. Based on this information, please answer the following questions: Question 11: Ceteris paribus, how will these two changes shift the Demand and Supply curves in the organic egg market? Question 12 : Ceteris paribus, how will these shifts change the equilibrium...
With the information provided you should be able to (1) determine if there are arbitrage opportunities...
With the information provided you should be able to (1) determine if there are arbitrage opportunities and (2) explain how those arbitrage opportunities can be exploited. The answers should be laid out clearly in numbered steps with simple sentences indicating: When the trade is happening If you are buying/selling If the action is taking place in the spot/forward market When will the action mature Show all cashflows and indicate the level of profits. If the steps are not clearly explained...
6.Which of the following is (are) the reasons for some people to choose interest only loan?...
6.Which of the following is (are) the reasons for some people to choose interest only loan? (There may be more than one correct answer. You will lose marks by choosing a wrong answer. The minimum mark for the question is zero.) Select one or more: a. The interest only loan provides more tax deductions for investment properties. b. The interest only loan is less expensive over the whole loan term. c. Banks usually apply lower interest rate for interest only...
1. When total revenue is less than variable costs in the short run, what will a...
1. When total revenue is less than variable costs in the short run, what will a firm in a competitive market do? Select one: a. It will continue to operate as long as average revenue exceeds marginal cost. b. It will shut down. c. It will continue to operate as long as average revenue exceeds average fixed cost. d. It will always exit the industry. 2. Consider a monopoly that is able to practice perfect price discrimination. Which of the...
Instructions You must record everything that you eat and drink for 2 days – a weekday...
Instructions You must record everything that you eat and drink for 2 days – a weekday and a weekend day. Try to select typical days that will reflect your true eating habits. Simply fill out the first two columns for each day on each of the prepared sheets that are provided. Consult the food exchange lists to estimate how many of the exchanges each food item contains. Consult Table 7-15 to determine the number of grams of fat, carbohydrate, and...
3. Suppose a bond’s price is expected to decrease by 5% if its market discount rate...
3. Suppose a bond’s price is expected to decrease by 5% if its market discount rate increases by 100 bps. If the bond’s market discount rate decreases by 100 bps, the bond price is most likely to increase by: a) 5% b) Less than 5% c) More than 5% d) none of the above. 4. An investor is considering the purchase of a 2-year bond with a 5% coupon rate, with interest paid annually. Assuming the following sequence of spot...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT