Abnormal Stock Returns, for the Event Firm and Its Rivals, Following the Event Firm's Large One-Day Stock Price Drop

Managerial Finance, Forthcoming

Posted: 9 Jan 2011 Last revised: 10 Jan 2011

See all articles by Susana Yu

Susana Yu

Iona College

Dean Leistikow

Fordham University - Finance Area

Date Written: November 10, 2010

Abstract

We find intra-industry contagion and the following other potential violations of the efficient market hypothesis following large one-day individual stock price decline events. On average, after an event, the event stock experiences a positive three-day abnormal return (S&P 600 stocks) followed by a seventeen day negative abnormal return (both S&P 500 and 600 stocks). Moreover, for that seventeen day period: 1) the rivals' stocks outperform the event firms' stocks and 2) the event firms' stock returns are statistically significantly related to pre-event variables. We also find statistically significant relationships between the pre-event variables and the rivals' post-event stock returns.

Keywords: Intra-Industry Effect, Price Reversal, Price Continuity

JEL Classification: G14

Suggested Citation

Yu, Susana and Leistikow, Dean, Abnormal Stock Returns, for the Event Firm and Its Rivals, Following the Event Firm's Large One-Day Stock Price Drop (November 10, 2010). Managerial Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1737533

Susana Yu (Contact Author)

Iona College ( email )

715 North Avenue
New Rochelle, NY 10801
United States

Dean Leistikow

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

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