Multi-Country Event Study Methods
Posted: 19 Mar 2009 Last revised: 10 Nov 2015
Date Written: July 9, 2010
We provide the first simulation evidence of event-study test performance in multi-country non-U.S. samples. The nonparametric rank and generalized sign tests are more powerful than two common parametric tests, especially in multi-day windows. The two nonparametric tests are mostly well specified, but neither is perfectly specified in all situations. The parametric standardized cross-sectional test can provide a useful robustness check but is less powerful than the nonparametric tests and rejects too often in single-market samples and when firm-specific events affect the market index. Local-currency market model abnormal returns using national market indexes are sufficient.
Keywords: event study methodology, Datastream, stock-price reaction, international finance, market-moving events
JEL Classification: G14
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