Dominos' Pizza common stock has a daily standard deviation of returns of 70 basis points (.70%). The expected return on the market is 2 basis points (.02%) per day. On Monday, June 9th, 2003, Pizza Hut (Dominos' Pizza major competitor) announced and started to sell in all of its stores a new "Mad Pizza Package deal" (for just $14.95 you get 3 medium pies, 12 boneless wings, and a 2-liter bottle of Coke). Dominos' stock return was -1.85% on the day of the announcement and -0.2%, -0.2%, and 0% on the three trading days immediately prior to the announcement, respectively. During the 3 trading days immediately after the announcement, Dominos' stock returns were -1.95%, -0.1%, and 0%. No other announcements that could affect publicly traded Pizzerias occurred between June 4 and June 12. In this case, an abnormal return (AR) is considered statistically significant if it is larger than 2 standard deviations in absolute value (this is the threshold).
The return pattern associated with Domino's stock around the day of the "Mad Pizza Package deal" is:
a. Consistent with the strong form of the efficient market hypothesis and evidence that investors believe that the package deal will NOT sell well.
b. Consistent with the strong form of the efficient market hypothesis and evidence that investors believe that the package deal will sell well.
c. Consistent with the semi-strong form of the efficient market hypothesis and evidence investors believe that the package deal will NOT sell well.
d. Consistent with the semi-strong form of the efficient market hypothesis and evidence that investors believe that the package deal will sell well.
e. None of the above