Tests for Abnormal Returns in the Presence of an Event-Induced Increase in the Cross Sectional Correlation

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Sammanfattning

Standard tests for abnormal returns are invalid if the abnormal returns are cross sectionally correlated. We model the cross sectional correlation in the abnormal returns by a spatial autoregressive (SAR) model. The SAR model estimates the cross sectional correlation in the abnormal returns from the event day, or event period. Tests which are robust to an event-induced increase in the volatility and cross sectional correlation of the abnormal returns are proposed. Empirical applications to US stock returns around Bear Stearns' collapse and Lehman Brothers' bankruptcy in 2008 are provided as illustrations.
OriginalspråkEngelska
Titel på gästpublikation68th European Meeting of the Econometric Society
Antal sidor38
FörlagEEA-ESEM - European Economic Association & Econometric Society
Utgivningsdatum25.08.2014
StatusPublicerad - 25.08.2014
MoE-publikationstypB3 Icke-referentgranskad artikel i konferenspublikation
Evenemang68th European Meeting of the Econometric Society (ESEM) - Toulouse, Toulouse, Frankrike
Varaktighet: 25.08.201429.08.2014
Konferensnummer: 68

Nyckelord

  • 511 Nationalekonomi
  • KOTA2014

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