A Robust and Powerful Test of Abnormal Stock Returns in Long-Horizon Event Studies
64 Pages Posted: 11 Jul 2013 Last revised: 5 Oct 2017
Date Written: July 11, 2013
This paper proposes a novel standardized test for abnormal returns in long-horizon event studies that takes into account cross-sectional correlation, autocorrelation, and hetersoskedasticity of stock returns. Extensive simulation analyses demonstrate improved size and power of testing relative to existing long-run test methodologies. Application to initial public offerings and seasoned equity offerings further demonstrates robustness to extreme return outliers inherent in these long-run studies.
Keywords: Abnormal returns, Long-run event study, Standardized returns, IPOs, SEOs
JEL Classification: C4, G1
Suggested Citation: Suggested Citation