Hostname: page-component-745bb68f8f-lrblm Total loading time: 0 Render date: 2025-01-13T13:34:10.219Z Has data issue: false hasContentIssue false
  • English
  • Français

Conditioning the Return-Generating Process on Firm-Specific Events: A Discussion of Event Study Methods

Published online by Cambridge University Press:  06 April 2009

Rex Thompson
Get access Rights & Permissions [Opens in a new window]

Extract

Empirical investigations into the codetermination of security prices and economic events are called event studies. There are several ways of estimating the codetermination of interest. Since Fama, Fisher, Jensen, and Roll [8], it has been general practice to first translate variables into rates of return, then net out general market movements, and, finally, examine the relationship between residual returns and events. The methodology in all of its variants falls under the rubric of “residual analysis.”

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 20 , Issue 2 , June 1985 , pp. 151 - 168
Copyright
Copyright © School of Business Administration, University of Washington 1985

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Binder, J. “Measuring the Effects of Regulation with Stock Price Data: A New Methodology.” Working Paper, University of Chicago and Washington University (08 1983).Google Scholar
[2]Brown, S. J., and Warner, J. B.. “Measuring Security Price Performance.” Journal of Financial Economics, Vol. 8 (1980), pp. 205–258.CrossRefGoogle Scholar
[3]Burgstahler, D. C., and Noreen, E. W.. “A Method for Detecting Market Reactions to Related Events.” University of Washington (02 1984).Google Scholar
[4]Buse, A. “The Likelihood Ratio, Wald, and Lagrange Multiplier Tests: An Expository Note.” The American Statistician, Vol. 36, No. 3, Part I (08 1982), pp. 153–157.Google Scholar
[5]Collins, D., and Dent, W.. “A Comparison of Alternative Testing Methodologies Used in Capital Market Research.” Journal of Accounting Research, Vol. 22 (1984), pp. 48–84.CrossRefGoogle Scholar
[6]Collins, D. W.; Rozeff, M. S.; and Salatka, W. K.. “The SEC's Rejection of SFAS No. 19: Tests of Market Price Reversal.” The Accounting Review, Vol. 57 (1982), pp. 1–17.Google Scholar
[7]Dielman, T.; Nantell, T.; and Wright, R.. “Price Effects of Stock Repurchasing: A Random Coefficient Regression Approach.” Journal of Financial and Quantitative Analysis, Vol. 15 (03 1980), pp. 175–189.CrossRefGoogle Scholar
[8]Fama, E.; Fisher, L.; Jensen, M.; and Roll, R.. “The Adjustment of Stock Prices to New Information.” International Economic Review, Vol. 10 (02 1969), pp. 1–21.CrossRefGoogle Scholar
[9]Fisher, L., and Kamin, J.. “Forecasting Systematic Risk: Estimates of ‘Raw’ Beta that Take Account of the Tendency of Beta to Change and the Heteroscedasticity of Residual Returns.” Journal of Financial and Quantitative Analysis, Vol. 20, (06 1985), pp. 127–149.CrossRefGoogle Scholar
[10]Gibbons, M. R. “Econometric Methods for Testing a Class of Financial Models—an Application of the Nonlinear Multivariate Regression Model.” Unpublished Ph.D. Dissertation, University of Chicago.Google Scholar
[11]Goldberger, A.Econometric Theory. NY: John Wiley and Sons, Inc. (1964).Google Scholar
[12]Hess, P. “Tests for Tax Effects in the Pricing of Financial Assets.” Journal of Business, Vol. 56, 4 (1983), pp. 537–554.CrossRefGoogle Scholar
[13]Johnston, J.Econometric Methods, Second Edition. NY: McGraw-Hill, Inc. (1972).Google Scholar
[14]Judge, G.; Griffiths, W.; Hill, R.; and Lee, T.. The Theory and Practice of Econometrics. NY: John Wiley and Sons, Inc. (1980).Google Scholar
[15]Judge, G.; Griffiths, W.; Hill, R.; and Lutkepohl, H.. Introduction to the Theory and Practice of Econometrics. NY: John Wiley and Sons, Inc. (1982).Google Scholar
[16]Malatesta, P. “Measuring Abnormal Performance: The Event Parameter Approach Using Joint Generalized Least Squares.” University of Washington (05 1984).Google Scholar
[17]Malatesta, P., and Thompson, R.. “Partially Anticipated Events: A Model of Stock Price Reactions with an Application to Corporate Acquisitions.” Journal of Financial Economics (forthcoming).Google Scholar
[18]Mandelker, G. “Risk and Return: The Case of Merging Firms.” Journal of Financial Economics, Vol. 1 (1974), pp. 303–336.CrossRefGoogle Scholar
[19]Patell, J. “Corporate Forecasts of Earnings Per Share and Stock Price Behavior.” Journal of Accounting Research, Vol. 14 (1976), pp. 246–275.CrossRefGoogle Scholar
[20]Patell, J., and Kaplan, R.. “The Information Content of Cash Flow Data Relative to Annual Earnings.” Working Paper, Stanford University (08 1977).Google Scholar
[21]Press, S. J.Applied Multivariate Analysis. NY: Holt, Rinehart and Winston (1972).Google Scholar
[22]Schipper, K., and Thompson, R.. “The Impact of Merger-Related Regulations on the Shareholders of Acquiring Firms.” Journal of Accounting Research, Vol. 21 (Spring 1983), pp. 184–221.CrossRefGoogle Scholar
[23]Schipper, K., and Thompson, R.. “The Impact of Merger-Related Regulations: Finite Sample Distributions and a Reinterpretation of Significance.” Journal of Accounting Research (forthcoming).Google Scholar
[24]Sefcik, S., and Thompson, R.. “An Approach to Statistical Inference in Cross-Sectional Regression with Security Abnormal Returns as Dependent Variable.” Journal of Accounting Research (forthcoming).Google Scholar
[25]Theil, H.Principles of Econometrics. NY: John Wiley and Sons (1971).Google Scholar
[26]Vermaelen, T. “Common Stock Repurchases and Market Signalling.” Journal of Financial Economics, Vol. 9 (06 1981), pp. 139–183.CrossRefGoogle Scholar
[27]White, R., and Lusztig, P.. “The Price Effects of Rights Offerings.” Journal of Financial and Quantitative Analysis (03 1980), pp. 25–40.CrossRefGoogle Scholar