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1. Use the data in the AT&T-NCR spreadsheet. For each company, the spreadsheet shows the daily
return for AT&T, NCR, S&P500, and the Market Index with value-weighted returns.
For each company, estimate the equation for Normal Returns by running the following simple
regression (also known as the Market Model) with daily returns:
RAT&T = a + b RM
2. For each company, estimate two Normal Returns equations by using S&P500 and the Value
Weighted Index.
3. Use these Normal Returns equations to calculate Abnormal Returns on each Event Day during
AT&T’s takeover bids for NCR. The event dates are described in Table 1 (Report Date) of the
paper “An Analysis of Value Destruction in AT&T’s Acquisition of NCR”, Journal of Financial
Economics 39 (1995), by Lys and Vincent.
Abnormal Return on an Event Date = Actual Return – Normal Return
4. Summarize your results (including Regression output and Abnormal Returns) for both firms and
compare to the numbers in the paper by Lys and Vincent
