Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement

20 Pages Posted: 29 Aug 2013 Last revised: 20 Aug 2018

See all articles by Andrew Phin

Andrew Phin

University of New South Wales (UNSW)

Todd Prono

Federal Reserve Board

Jonathan J. Reeves

UNSW Business School, University of New South Wales; Financial Research Network (FIRN)

Konark Saxena

University of New South Wales

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2016

Abstract

Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its abnormal returns are largely realized on the first day. The abnormal returns in the remaining post event period, which show up as a drift using standard methodology, are attributed to level shifts in beta.

Keywords: event studies, intraday returns, systematic risk

JEL Classification: G12, G14

Suggested Citation

Phin, Andrew and Prono, Todd and Reeves, Jonathan J. and Saxena, Konark, Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement (November 1, 2016). UNSW Australian School of Business Research Paper No. 2013 BFIN 06. Available at SSRN: https://ssrn.com/abstract=2317710 or http://dx.doi.org/10.2139/ssrn.2317710

Andrew Phin

University of New South Wales (UNSW) ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Todd Prono

Federal Reserve Board ( email )

20th and Constitution Ave NW
Washington, DC 20551
United States

Jonathan J. Reeves (Contact Author)

UNSW Business School, University of New South Wales ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Konark Saxena

University of New South Wales ( email )

School of Banking and Finance
Australian School of Business
Sydney, NSW 2052
Australia

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