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The following graph shows the behaviour of average cumulative abnormal return for a sample of companies
that announced positive earnings forecasts. It presents daily cumulative abnormal return for 21 days, from day
-10 to day + 10 where day 0 is the earnings forecast announcement day.
Cumulative abnormal return
0.025
0.02
0.015
0.01
0.005
-15
-10
5
10
15
-0.005
Day relative to announcement day
Explain whether the behaviour of cumulative abnormal return in this graph is consistent with the efficient market
hypothesis. If not, explain what behavioural bias/critique is reflected in the above graph.
Subject: Business, Finance

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