• An abnormal return is a return that deviates from the expected return on an investment.

  • The presence of abnormal returns, which can be either positive or negative, helps investors determine risk-adjusted outcomes.
  • Abnormal earnings can be generated by accident, due to some external or unforeseen event, or as a result of the actions of unscrupulous players.
  • Cumulative Abnormal Returns (CAR) is the sum of all abnormal returns and can be used to measure the impact of lawsuits, buyouts, and other events on stock prices.