Event Study

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� t − stat = 1 σ N ∑ i= 1 20 AAR N σ ( AR − AAR) i N −1 2 N. AAR = ; σ where σAR corresponds to the cross-sectional variance of the abnormal return. In the homoscedastic case, as defined above, the Student t-statistic is independent of the variance of the individual firm’s market-model residual. AR
References Aktas, N., E. de Bodt and R. Roll, 2004. Market response to European regulation of business combinations, Journal of Financial and Quantitative Analysis 39, 731–758. Aktas, N., J.G. Cousin and E. de Bodt, 2007. <strong>Event</strong> studies with a contaminated estimation period, Journal of Corporate Finance 13, 129–145. Ball, C. and W. Torous, 1988. Investigating security-price performance in the presence of event-date uncertainty, Journal of Financial Economics 22, 123–154. Brandt, M.W., A. Brav and J.R. Graham, 2005. The idiosyncratic volatility puzzle: time trend or speculative episodes? SSRN Working Paper: http://ssrn.com/abstract=851505. Brown, S. and J. Warner, 1980. Measuring security price performance, Journal of Financial Economics 8, 205–258. Brown, S. and J. Warner, 1985. Using daily stock returns: the case of event studies, Journal of Financial Economics 14, 3–31. Boehmer, E., J. Musumeci and A. Poulsen, 1991. <strong>Event</strong> study methodology under conditions of event induced variance, Journal of Financial Economics 30, 253–272. Campbell, J. Y., M. Lettau, B. Malkiel and Y. Xu, 2001. Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk, Journal of Finance 56, 1−43. Corrado, C., 1989. A nonparametric test for abnormal security price performance in event studies, Journal of Financial Economics 23, 385–395. Corrado, C. and T. Zivney, 1992. The specification and power of the sign test in event study hypothesis tests using daily stock returns, Journal of Financial and Quantitative Analysis 27, 465–478. Cowan, A., 1992. Nonparametric event study tests, Review of Quantitative Finance and Accounting 2, 343–358. Cowan, A. and A. Sergeant, 1996. Trading frequency and event study test specification, Journal of Banking and Finance 20, 1731−1757. Davidson, R. and J.G. MacKinnon, 1998, Graphical methods for investigating the size and power of hypothesis tests, The Manchester School 66, 1−26. Fama, E., L. Fisher, M. Jensen and R. Roll, 1969. The adjustment of stock prices to new information, International Economic Review 10, 1–21. Fuller, K., J. Netter and M. Stegemoller, 2002. What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions, Journal of Finance 57, 1763−1793. Goergen, M. and L. Renneboog, 2004. Shareholder wealth effects of European domestic and cross-border takeover bids, European Financial Management 10, 9−45. Guo, H. and R. Savickas, (in press). Average idiosyncratic volatility in G7 countries, Review of Financial Studies. Harrington, S. and D. Shrider, 2007. All events induce variance: analyzing abnormal returns when effects vary across firms, Journal of Financial and Quantitative Analysis 42, 229–256. Karafiath, I., 1988. Using dummy variables in the event methodology, Financial Review 23, 351−357. Kothari, S.P. and J.B. Warner, 2007. Econometrics of event studies, in Eckbo, B.E. (ed.) Handbook of Corporate Finance, North Holland Elsevier, pp. 3−36. Malatesta, P. and R. Thompson, 1985, Partially anticipated events: a model of stock price reactions with an application to corporate acquisitions, Journal of Financial Economics 14, 237–250. 21
Page 1 and 2: Assessing the power and size of the
Page 3 and 4: test, the length of the estimation
Page 5 and 6: Warner (1980), Boehmer et al. (1991
Page 7 and 8: t ACAR N N 1 2 1 2⎛ ⎞ = ∑TEγ
Page 9 and 10: academic literature. Let us denote
Page 11 and 12: Sample construction. Our universe o
Page 13 and 14: ― The most recent sub-period (200
Page 15 and 16: As the portfolio size clearly plays
Page 17 and 18: frequency with which the average CA
Page 19: the ratio of idiosyncratic variance
Page 23 and 24: Figure 1. Size-power curves for the
Page 25 and 26: Table 1. Descriptive statistics Thi
Page 27 and 28: Table 3. Rejection rates of test st
Page 29: Table 5. Ratios of average idiosync

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