Finance

In an event study, what two steps does a researcher take to adjust for

In an event study, what two steps does a researcher take to adjust for the valuation effects of other new (and simultaneously-revealed) value-relevant information, in order to isolate the valuation effect of a specific event? a. (i) using the market model to remove the effects of other firm-specific factors; and (ii) averaging abnormal returns across […]

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Date: September 19th, 2020

Richard works for a firm that is expanding into a completely new line

Richard works for a firm that is expanding into a completely new line of business. He has been asked to determine an appropriate WACC for an average-risk project in the expansion division. Richard finds two publicly traded stand-alone firms that produce the same products as his new division. The average of the two firms’ betas […]

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Date: September 19th, 2020

In the _(i)_ of the efficient market hypothesis (EMH), a security’s pr

In the _(i)_ of the efficient market hypothesis (EMH), a security’s price reflects all publicly available information. In the __(ii)_ form of the EMH, a security’s price reflects all information that may be contained in the historical prices of a security. In the _(iii)_ of the EMH, a security’s price reflects all information, whether it […]

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Date: September 19th, 2020