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Question: part 2 market efficiency 6 marks on the 17th of...

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Part 2 Market Efficiency (6 marks)

On the 17th of April, CQE announced that it had secured a large injection of fresh equity which would ensure the firm could survive an extended period of shutdown due to social isolation. This new customer is expected to bring significant new revenues to CQE. With reference to the below price information, answer the following (Rm = Market Return). The current risk free rate is 2% annually (0.005% daily). Please calculate everything at the daily rate:

a. Calculate CQE Abnormal Return for 17th April (1 mark)

b. Calculate CQE Abnormal Return for  other  days before/after announcement (use provided space)(1.5 marks)

c. What kind of market efficiency do your calculations point to? Why? Please provide examples of what you observe (1.5 marks)

d. Explain how you would expect abnormal returns to differ under the alternative types of market efficiency.  (2 marks)

  Date

  Change

  Open

  High

  Low

  Close

Volume

Rm

AR

  23/04/2020

  0.0%

  $2.24

  $2.37

  $2.16

  $2.23

821,675

0.20%

 

  22/04/2020

  -0.4%

  $2.20

  $2.29

  $2.14

  $2.23

927,378

-0.65%

 

  21/04/2020

  -1.3%

  $2.28

  $2.33

  $2.20

  $2.24

1,151,178

-0.10%

 

  20/04/2020

  0.0%

  $2.28

  $2.35

  $2.23

  $2.27

2,096,182

0.11%

 

  17/04/2020

  7.1%

  $2.18

  $2.29

  $2.15

  $2.27

1,274,803

2.30%

 

  16/04/2020

  -0.9%

  $2.10

  $2.13

  $2.05

  $2.12

695,427

-0.20%

 

  15/04/2020

  0.5%

  $2.14

  $2.20

  $2.09

  $2.14

812,322

0.20%

 

  14/04/2020

  -3.6%

  $2.22

  $2.26

  $2.11

  $2.13

758,648

-0.75%

 

  09/04/2020

  2.8%

  $2.23

  $2.23

  $2.15

  $2.21

895533

0.85%

 

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