Abstract

http://ssrn.com/abstract=1814236
 


 



Event Study Analysis: Correctly Measuring the Dollar Impact of an Event


Atanu Saha


Compass Lexecon

Allen Ferrell


Harvard Law School; European Corporate Governance Institute (ECGI)

April 18, 2011

Harvard Law and Economics Discussion Paper

Abstract:     
Using the traditional event study approach in the context of securities litigation, the determination of the "materiality" of a firm disclosure hinges on the statistical significance of the abnormal share price change (i.e., return) on the disclosure day. To estimate per share damages, the abnormal return is then transformed to an abnormal dollar impact. It is often assumed that if the abnormal return on a disclosure day is statistically significant, so is the abnormal dollar effect. We demonstrate - first analytically and then through an empirical example - that need not be the case. We derive the proper t-statistic if one wishes to determine the statistical significance of an abnormal dollar effect. This has obvious implications for liability and damages in securities litigation matters.

Number of Pages in PDF File: 13

Keywords: 10b-5 damages, materiality, securities litigation, securities damages, event study analysis, t-statistic

JEL Classification: G14, K22, K42

working papers series


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Date posted: April 20, 2011  

Suggested Citation

Saha, Atanu and Ferrell, Allen, Event Study Analysis: Correctly Measuring the Dollar Impact of an Event (April 18, 2011). Harvard Law and Economics Discussion Paper. Available at SSRN: http://ssrn.com/abstract=1814236 or http://dx.doi.org/10.2139/ssrn.1814236

Contact Information

Atanu Saha
Compass Lexecon ( email )
New York, NY
United States
Allen Ferrell (Contact Author)
Harvard Law School ( email )
Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Feedback to SSRN


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