1d) Method 1: Using rt Rmt calculation for abnormal earnings One-Sample t-test Ho: = 0 Ha: > 0 Variable N Mean

ean StDev Actual 10 0.0227 0.0448 SE Mean 0.0142 95% Lower Bound -0.0032 T P 1.60 0.071

With an alpha set at 0.05, the results of the one-sample t test were not significantly different from 0, t(9) = 1.60, p > 0.05. Binomial Distribution We observed 8 successes for our 10 trials. The given probability of success for each trial was .5. The p-value we obtained was 0.010742188, which is less than an alpha level of 0.05. These results are significant. Method 2: Using CAPM calculations for abnormal earnings One-Sample t-test Ho: = 0 Ha: > 0 Variable N Mean Actual 10 0.0112 StDev 0.0435 SE Mean 0.0138 95% Lower Bound -0.0141 T 0.81 P 0.219

With alpha set at 0.05, the results of the one-sample t test were not significantly different from 0, t(9) = 0.81, p > 0.05. Binomial Distribution We observed 7 successes for our 10 trials. The given probability of success for each trial was .5. The p-value we obtained was 0.0546875, which is greater than an alpha level of 0.05. These results are not significant, but are very close.

Discussion: Our event study examined the abnormal annual returns of IBM corporation over a 10year window. Had we examined a larger number of earnings announcements (i.e 50 or 100) the results may have had statistical and/or practical significance. Despite lacking statistical significance in either t-test performed we believe that there is a possible relationship between earnings announcements and abnormal returns. In both Methods the mean actual deviation in direction predicted was larger than zero (0.0227 & 0.0112 for Method 1 and Method 2, respectively). Also, the p-values for either method of calculating abnormal earnings were either significant, or very close to significant (0.010742188 & 0.0546875 for Method 1 and Method 2, respectively). As a result, we feel that earnings announcements (good or bad) do have an influence on the abnormal returns of a corporations stock in a + 3 day window from the announcement.