This article examines the issue of cross-sectional correlation in event studies. When there is event-date clustering, we find that even relatively low cross-correlation among abnormal returns is serious in terms of over-rejecting the null hypothesis of zero average abnormal returns.We propose a...

This study applies a rolling estimation window approach to adjust for time-varying risk parameters in asset pricing models to compute long-run abnormal returns after major corporate events. Abnormal returns are defined as realized returns minus predicted returns on each day in a five-year,...

This paper utilizes Black's (1972) zero-beta CAPM to derive an alternative form dubbed the ZCAPM. The ZCAPM posits that asset prices are a function of market risk composed of two components: average market returns and cross-sectional market volatility. Market risk associated with average market...

Bessembinder and Zhang (2013) show that long-run abnormal returns after major corporate events detected by the BHAR method using size and book-to-market matched control stocks can be explained by differences between event and control stocks' unsystematic and systematic characteristics. We find...

This paper proposes a novel standardized test for abnormal returns in long-horizon event studies that takes into account cross-sectional correlation, autocorrelation, and hetersoskedasticity of stock returns. Extensive simulation analyses demonstrate improved size and power of testing relative...