Determination of the Appropriate Event Window Length in Individual Stock Event Studies

24 Pages Posted: 1 Dec 2003

See all articles by Dmitry Krivin

Dmitry Krivin

National Economic Research Associates, Inc. (NERA)

Robert Patton

NERA Economic Consulting

Erica Rose

National Economic Research Associates, Inc. (NERA)

David Tabak

National Economic Research Associates, Inc. (NERA)

Date Written: November 4, 2003

Abstract

It is common practice to assess the average effect of some type of announcement on stock prices by performing event studies on a large sample of firms and then averaging or otherwise combining the results. One benefit of this procedure is that the event window length can be standardized across observations because the errors from having too long or short an event window should have a small impact on the average by the Law of Large Numbers. Here, we examine various potential rules for determining the length of an event window when looking at a limited number of observations. We find that rules based on continuing price movements yield window lengths that correlate with the "size" of the news, as measured by the magnitude of earnings surprises, while a rule based on abnormally high volume does not have this property.

Keywords: Event Study

JEL Classification: G14

Suggested Citation

Krivin, Dmitry and Patton, Robert and Rose, Erica and Tabak, David, Determination of the Appropriate Event Window Length in Individual Stock Event Studies (November 4, 2003). Available at SSRN: https://ssrn.com/abstract=466161 or http://dx.doi.org/10.2139/ssrn.466161

Dmitry Krivin

National Economic Research Associates, Inc. (NERA) ( email )

1166 Avenue of the Americas, 34th Floor
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Robert Patton

NERA Economic Consulting ( email )

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London W1C 1BE
United Kingdom
+44 20 7659 8620 (Phone)

HOME PAGE: http://www.nera.com/experts/robert-patton.html

Erica Rose

National Economic Research Associates, Inc. (NERA) ( email )

1166 Avenue of the Americas, 34th Floor
New York, NY 10036
United States
212-345-3000 (Phone)
212-345-4650 (Fax)

David Tabak (Contact Author)

National Economic Research Associates, Inc. (NERA) ( email )

1166 Avenue of the Americas, 24th Floor
New York, NY 10036
United States
212-345-2176 (Phone)
212-345-4664 (Fax)

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