The Application of Event Methodology in Municipal Finance Research

This article explains how event methodology can be applied in municipal finance research. Event methodology examines the impact of specific events on the rate of return on financial securities and can be utilized to study the impact of political, legal, and economic events on municipal bond returns (Epple and Spatt 1986). One advantage of this methodology is that seasoned (previously issued) bonds rather than just new bond issues can be used in the research. Frequently, no new bonds or only a few new bonds are issued by governmental units around the time of the event under investigation. Hence, a study based only on new bond issues may have a sample size that is too small or may include bonds that have unique characteristics different from the typical issuer impacted by the event