Description
Calculate an observed return's signed difference from its benchmark return.
Financial market terms depend on quote conventions, contract multipliers, rate units, horizons and signed positions. A price gap, intrinsic value or linear sensitivity is a limited scenario term rather than an executable price or complete valuation. Variance, volatility, fractional rates and basis points are different quantities.
Calculate an observed return's signed difference from its benchmark return.
When to use this tool
Use Event Study Abnormal Return when checking the stated supplied market, valuation or exposure convention.
How to use the tool and how it works
- Enter observedReturnFraction, benchmarkReturnFraction. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read abnormalReturn. Use the output convention below.
Return observedReturnFraction-benchmarkReturnFraction as abnormalReturn.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| observedReturnFraction | Observed Return Fraction | Required. Finite number. |
| benchmarkReturnFraction | Benchmark Return Fraction | Required. Finite number. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| abnormalReturn | Observed fractional return minus benchmark fractional return; not percentage points unless converted separately. | Required. Finite number. |
{
"input": {
"observedReturnFraction": 0.05,
"benchmarkReturnFraction": 0.02
},
"output": {
"abnormalReturn": 0.030000000000000002
}
}Limitations and assumptions
- Both use fractional returns and matching periods; no benchmark model, causal event effect, significance or cumulative return is estimated.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use verified contract/market data and a complete suitable valuation and risk model with qualified financial advice for actual investment or trading decisions.
References
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