In the 2016 Presidential election season, Hillary Clinton expressed concern over outsourcing the management of federal and state prisons to private prison management firms, stating in the first debate, “I’m glad that we’re ending private prisons in the federal system. I want to see them ended in the state system.” As Clinton began to take a large lead in the polls, prison management firms CoreCivic (ticker CXW) and GEO Group (ticker GEO) posted substantial declines. Using Yahoo Finance (finance.yahoo.com), find the closing prices for these stocks for each day around the election. On Yahoo, go to the “Historical Data” section on each stock’s page. You will need the Adjusted Closing Prices on 11/7/2016, 11/8/2016, and 11/9/2016.
a. Find each stock’s return on 11/8 and 11/9.
b. Construct a price-weighted index for the two prison stocks and find the return to the index on 11/8 and 11/9.
c. Construct a market-cap weighted index for the two prison stocks and find the return to the index on 11/8 and 11/9. You can assume that the number of shares outstanding (found on the “Statistics” page) has remained constant in the months since the election.