Abnormal Returns
19 Pages Posted: 11 May 2001
Date Written: March 2001
Abstract
This paper analyzes a simple test statistic for abnormal returns in the presence of stochastic volatility during both event and non-event windows and in the presence of event-induced variance increase. Unlike previous tests, the parametric test evaluated here does not require that the volatility effect of the event be the same across all securities. Simulations show that the test exhibits non-trivial gains in power over the previous parametric and non-parametric tests. At the same time, the true null hypothesis is rejected at appropriate levels.
Keywords: Stochastic volatility, event studies, GARCH
JEL Classification: G14, C10
Suggested Citation: Suggested Citation
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