Event Studies Using Forward-Looking Information

21 Pages Posted: 13 Feb 2013 Last revised: 22 Jul 2014

See all articles by Aaron D. Dolgoff

Aaron D. Dolgoff

Charles River Associates

Tiago Duarte-Silva

Charles River Associates (CRA); Boston College

Date Written: May 1, 2013


Traditional event study methods use regression models to estimate market models and conduct statistical tests. We present a method based on option-implied information about the distribution of stock returns and the co-movement with return factors. This method decreases the reliance on historical market information, uses more contemporaneous inputs, and avoids potential bias from standard regression approaches. We derive this method for one- and two-factor models and provide illustrations of how it compares to the historical and in-sample approaches. We discuss empirical implementation issues and situations where this forward-looking approach might be most appropriate.

Keywords: Event studies, Option-implied volatility

JEL Classification: G14

Suggested Citation

Dolgoff, Aaron D. and Duarte-Silva, Tiago, Event Studies Using Forward-Looking Information (May 1, 2013). Available at SSRN: https://ssrn.com/abstract=2215096 or http://dx.doi.org/10.2139/ssrn.2215096

Aaron D. Dolgoff

Charles River Associates ( email )

John Hancock Tower
200 Clarendon Street, T-31
Boston, MA 02116-5092
United States
617-425-3623 (Phone)

Tiago Duarte-Silva (Contact Author)

Charles River Associates (CRA) ( email )

200 Clarendon Street, T-31
Boston, MA 02116
United States
+1-617-425-3128 (Phone)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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