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On the Use of the Log CAR Measure in Event Studies

Cambridge University Research Paper in Management Studies Working Paper No. 08/2000

9 Pages Posted: 8 Jan 2003  

Gishan Dissanaike

University of Cambridge - Judge Business School

Alexandre Le Fur

Dresdner Kleinwort Wasserstein - Equity Capital Markets

Multiple version iconThere are 2 versions of this paper

Date Written: March 2000

Abstract

Cross-sectional averages of logarithmic returns have been used to measure shareholder wealth effects in several Event Studies. No adequate explanation of the implied portfolio strategy has ever been provided in the literature. We argue that the method is biased or does not portray a realistic portfolio strategy. It should therefore be used with caution in the 'event study' literature.

Keywords: Event Study, Continuously Compounded Returns, Geometric Mean, Wealth Effects, Corporate Finance, Market Efficiency

JEL Classification: G14, G34

Suggested Citation

Dissanaike, Gishan and Le Fur, Alexandre, On the Use of the Log CAR Measure in Event Studies (March 2000). Cambridge University Research Paper in Management Studies Working Paper No. 08/2000. Available at SSRN: https://ssrn.com/abstract=352940 or http://dx.doi.org/10.2139/ssrn.352940

Gishan Dissanaike (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+441 223 339626 (Phone)
+441 223 339701 (Fax)

Alexandre Le Fur

Dresdner Kleinwort Wasserstein - Equity Capital Markets ( email )

P.O. Box 560
20 Fenchurch Street
London EC3P 3DB
United Kingdom
+44 207 475 9813 (Phone)
+44 207 475 7515 (Fax)

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