It is often be useful to study the historical share price of a company. The historical development can tell us what strategic actions and initiative that are liked and disliked by the investors. We should not assume the investors are always right, in fact they are often wrong, but it is nevertheless important to understand the investor perspective. We can also learn about the mindset of the key executives by looking whether their experience is one of growth or decline.
For an analysis to be meaningful, the share price cannot be analysed directly. In particular it is important to remove the effect of the general stock market. In finance, the resulting time series is called the company's abnormal return. This post will outline how to describe a company's abnormal returns and what kind of question you can ask yourself when analysing the abnormal returns.