(Answered) Suppose a company announces a bid to acquire a smaller

Finance

Suppose a company announces a bid to acquire a smaller rival on a day that macroeconomic news indicated that inflation was picking up. On the day of both announcements, the firm's return was -0.55% while the market return was -0.48%. The daily CAPM market model coefficients for the firms are α = 0.05 and β = 0.8. Using the market model and the market-adjusted model, determine abnormal returns for the firm and thereby assess whether the acquisition announcement represented good or bad news for the firm.

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