Event Time

24 Pages Posted: 6 May 2022

See all articles by Megan Czasonis

Megan Czasonis

State Street Corporate

Mark Kritzman

Windham Capital Management; Massachusetts Institute of Technology (MIT) - Sloan School of Management

David Turkington

State Street Associates

Date Written: May 4, 2022


Investors take for granted that returns are recorded in units of time, such as days, months, or years. Yet some time periods include unusual events that reasonably cause asset prices to change, whereas other periods are relatively free of unusual events, in which case returns mostly reflect noise. Based on insights from information
theory, the authors rescale time into event units so that each return is related to a common degree of event intensity. Their analysis reveals that when returns are measured in event units, their distributions are more normal and their co-occurrences are more stable, which enables analysts to form more reliable inferences.

Keywords: Calendar time, Co-occurrence, Event intensity, Event time, Information theory, Informativeness, Kullback-Leibler divergence, Kurtosis, Mahalanobis distance, Normal divergence, Pearson correlation, Relative entropy, z-score

JEL Classification: C1, C13, C40, C46, C58, C60, C63, C80, G10, G11

Suggested Citation

Czasonis, Megan and Kritzman, Mark and Turkington, David, Event Time (May 4, 2022). MIT Sloan Research Paper No. 6700-22, Available at SSRN: https://ssrn.com/abstract=4101500 or http://dx.doi.org/10.2139/ssrn.4101500

Megan Czasonis (Contact Author)

State Street Corporate ( email )

1 Lincoln Street
Boston, MA 02111
United States

Mark Kritzman

Windham Capital Management ( email )

One Federal Street
21st Floor
Boston, MA 02110
United States
6174193900 (Phone)
6172365034 (Fax)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

David Turkington

State Street Associates ( email )

United States

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