A robust and powerful test of abnormal stock returns in long-horizon event studies

Anupam Dutta, Johan Knif, James Kolari, Seppo Pynnönen

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper proposes a novel standardized test for abnormal returns in long-horizon event studies that takes into account cross-sectional correlation, autocorrelation, and heteroskedasticity of stock returns. Extensive simulation analyses demonstrate improved size and power of testing relative to existing long-run test methodologies. Application to initial public offerings and seasoned equity offerings further demonstrates robustness to extreme return outliers inherent in these long-run studies.
Original languageEnglish
Peer-reviewed scientific journalJournal of Empirical Finance
Volume47
Issue numberJune
Pages (from-to)1-24
Number of pages24
ISSN0927-5398
DOIs
Publication statusPublished - 06.2018
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Abnormal returns
  • Long-run event study
  • Standardized returns
  • IPOs
  • SEOs

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