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Historical Daily Returns

Using historical daily returns, you estimated the following Index model for ET incorporated: rET = .01% + 1.75 r S&P500

On February 15, 2007, ET announced its intention to buy back 1,000,000 of its 5,000,000 outstanding shares in the open market. ET stock price closed 3% higher than the close on February 14. How much of the 3% increase can be attributed to the buy back announcement if the S7P500 was up by 1% on February 15?

Solution Preview

There was a 1% increase in S&P500. Putting this in the regression ...

Solution Summary

The solution uses the regression equation to solve the question.

$2.19