How Can Long-Run Abnormal Stock Returns Be Both Positively and Negatively Biased?
Posted: 9 May 1998
Date Written: May 1996
We document that long-run market-adjusted cumulative abnormal returns generally yield positively biased test statistics, while long-run market-adjusted buy-and-hold abnormal returns generally yield negatively biased test statistics. However, these general results are sensitive to (1) the period analyzed, (2) the inclusion of NASDAQ firms, and (3) the requirement of pre-event data. These three factors explain the why Barber and Lyon (1996) and Kothari and Warner (1996) obtain apparently contradictory results in their analysis of long-run abnormal returns.
JEL Classification: G12, G14
Suggested Citation: Suggested Citation