Event study

Please be advice that i have attached a file where you can find all data and calculations for this paper, and kindly follow the instructions and the guidelines below ... Thank you EVENT STUDY The aim of this paper is to analyse the effect of the RBA cash rate announcements on the share prices of eight banks and eight non-financial firms.(kindly check the attachment ), This should be undertaken using an event study Details of RBA cash rate announcements can be found at http://www.rba.gov.au/statistics/cash-rate/. The event window will cover 10 business days before and 10 business days after the event date (-10, -9, …, -1, 0, +1, … +9, +10). The event date (day 0) refers to the relevant cash rate announcement dates. The estimation period covers business days -510 to -11. Getting Started: 1. Obtain daily adjusted closing stock prices for eight banks and eight non-financial firms and the All Ordinaries index from http://au.finance.yahoo.com for the estimation period and the event window. (its all given, kindly check the attachment) Ensure that non-trading days are excluded from the estimation period and event window. You may locate non-trading days from http://www.asx.com.au/about/calendars.htm. (its all given, kindly check the attachment) 2. Calculate the daily continuously compounded returns data series for each of the nominated stocks and for the All Ordinaries index. Employ the “market model” to calculate abnormal returns over the event window (days -10, -9, …, -1, 0, +1, … +9, +10). (its all given, kindly check the attachment) NOTE: To calculate the abnormal returns in each day of the event window, you will first need to estimate the parameters (alpha and beta) of the market model for individual stocks using data from t=-510 to t=-11 to calculate expected (or normal) returns. (its all given, kindly check the attachment) Required This Paper should be provided in report format. This should include: a) A concise summary of the methodologies employed in your study and any limitations associated with your study. b) Tables containing the following numerical components of your findings: i. The market model beta and alpha estimates for each stock. ii. The abnormal return for each day of the event window (-10, -9, …, -1, 0, +1, … +9, +10) for each stock. iii. The average abnormal return (equal-weighted) for the eight bank stocks for each day of the event window. iv. The average abnormal return (equal-weighted) for the eight non-financial firm stocks for each day of the event window. v. The cumulative average daily abnormal return for each day in the event window for the eight bank stocks. vi. The cumulative average daily abnormal return for each day in the event window for the eight non-financial firm stocks. c) A graph which plots the average cumulative abnormal returns for the 21 day period for bank stocks. d) A graph which plots the average cumulative abnormal returns for the 21 day period for non-financial firm stocks (see example p.351 of Bodie et al, 2013). e) Your response to the three key questions: i. whether the market model is the most appropriate model to estimate expected returns. In your answer you should discuss the merit of using other models. ii. Paying separate attention to the period preceding the cash rate announcement, the time of the announcement and the period after the announcement, what are the implications of your findings for market efficiency? iii. Compare and contrast the stock return behavior of bank stocks with that of non-financial form stocks during the event window. The maximum word count for this section is 1500 words not including tables and figures; Marking Criteria The paper will be marked based on the following criteria: - Relevance to the question. - Accuracy of information/argument rationale. - Demonstrated links to corresponding readings, as appropriate. - Clarity of expression. - Compliance with submission requirements Readings 1. Chapter 16, Section 16.4: Peirson, G., Brown R., Easton, S., Howard, P., Pinder, S. (2011) Business Finance, 11th ed., McGraw-Hill. 2. Chapter 11 , pp.359-362, Bodie, Z., Kane, A., and Marcus, A., (2013) Investments, 10th edition, McGraw Hill, New York. 3. Yip, H. (2005), Spreadsheet Applications to Securities Valuation and Investment Theories, John Wiley & Sons, Milton. 4. J Teall , Chapter 4 Event Studies and Backtesting, Rensselaer Polytechnic Institute , Accessed at http://www.ibrarian.net/navon/paper/Chapter_4__Event_Studies_and_Back_Testing_A__Even.pdf?paperid=18087183 on 30 September, 2015.