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Massey Energy (MEE) is a mining company that processes and ships coal, operating 30 underground mines and 13 surface mines in West Virginia, Kentucky and Virginia. The company's steam coal is primarily purchased by utilities and industrial clients as fuel for power plants. On October 24, 2002, after the close of trading, the company announced its third quarter earnings. The file data3.xls contains daily excess returns (i.e. daily returns in excess of the risk-free return) for MEE, as well as daily excess returns for the market index (i.e. market returns in excess of the risk-free rate of return).
• Plot the daily abnormal returns and the daily cumulative abnormal returns for MEE over a 41 trading day window starting 10 days before the announcement and ending 30 days after the announcement (from day –10 to day +30). Use the returns during 210 trading days before the event window (days -220 to -11) to estimate the expected returns for MEE.
• Is there any unusual activity at announcement? Are your results consistent with the efficient market hypothesis?
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