Improved Methods for Tests of Long-Run Abnormal Stock Returns
We analyze tests for long-run abnormal returns and document that two approaches yield well-specified test statistics in random samples. The first uses a traditional event study framework and buy-and-hold abnormal returns calculated using carefully constructed reference portfolios. Inference is based on either a skewness-adjusted "t"-statistic or the empirically generated distribution of long-run abnormal returns. The second approach is based on calculation of mean monthly abnormal returns using calendar-time portfolios and a time-series "t"-statistic. Though both approaches perform well in random samples, misspecification in nonrandom samples is pervasive. Thus, analysis of long-run abnormal returns is treacherous. Copyright The American Finance Association 1999.
Year of publication: |
1999
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Authors: | Lyon, John D. ; Barber, Brad M. ; Tsai, Chih-Ling |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 54.1999, 1, p. 165-201
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Publisher: |
American Finance Association - AFA |
Saved in:
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