ABNORMAL RETURN USING EXCEL

Here, we show you how to count abnormal return by market-adjusted model using Microsoft Excel. By simply, market adjusted model assumes that the best estimator to estimate return expectation is composite index return in current period. If you receive return less that average return in market, actually you gain negative return, or you don’t get profit.

So, we can to count abnormal return by three steps, first, we count return actual, second we count actual expectation by composite index and the third step is count difference between return actual and actual expectation. Or,

AR = Ract – Rexp

AR (Abnormal return), Ract (Return actual), Rexp (Return Expectation).

Return actual and return expectation that count by formula:

R = (Pt - Pt-t1)/(Pt-1)

R (Return, actual or expectation), P (Price, actual or expectation), t (period)

We can see, that formula can be solve using Microsoft Excel like we have explain before in how to count actual return using Microsoft Excel.