Event Study Testing with Cross-sectional Correlation of Abnormal Returns

Kolari, James W.; Pynnönen, Seppo

doi:10.1093/rfs/hhq072

Cited by 499 publications

(408 citation statements)

References 30 publications

Supporting

Mentioning

401

Contrasting

Order By: Relevance

“…Consequently, using the traditional standardized return test statistics, even moderate cross-sectional correlation in an event study causes substantial over-rejection of the null hypothesis of no abnormal performance. Kolari and Pynnönen (2010) propose simple corrections to the popular Patell (1976) and Boehmer, Musumeci, and Poulsen (1991) statistics to account for the correlation. They show that, when there is no event-induced volatility increase, each of these corrected test statistics is approximately equally powerful and rejects the null hypothesis of no abnormal performance at the correct nominal rate when it is true.…”

Section: Literature Reviewmentioning

confidence: 99%

Parametric and Nonparametric Event Study Tests: A Review

Dutta¹

2014

IBR

View full text Add to dashboard Cite

This paper presents a modest attempt to review the existing methodologies for measuring short-run abnormal performance of firms following certain corporate events. In doing so, the study discusses different parametric as well as nonparametric testing procedures available in the literature. Reviewing the prior literature reveals that the nonparametric sign and rank tests are better specified than parametric procedures. However, in case of detecting the short-run anomalies, we document that nonparametric tests have higher power relative to standard parametric approaches.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Parametric and Nonparametric Event Study Tests: A Review

Dutta¹

2014

IBR

View full text Add to dashboard Cite

show abstract

“…Warner (1980, 1985) test the event study methodology empirically for the effect of events on the variance of stock returns conducting sampling and simulations. Finally, Kolari and Pynnonen (2010) suggest a modification to the event study analysis to account for co-movements of the prices of stock from the same industry that reacts in the same way to the same event. In our work, we apply this proposed methodology of Kolari and Pynnonen. As mentioned, the event study methodology consists of measuring the effect of a certain event on the return of one or more stocks.…”

Section: Event Study Methodologymentioning

confidence: 99%

“…Similar stocks tend to co-move in this case because of intra-sectional correlations. 13 To avoid the effects of intra-industry correlations, we implement the procedure suggested by Kolari and Pynnonen (2010), which we describe in detail in the next section.…”

Section: Event Study Methodologymentioning

confidence: 99%

See 1 more Smart Citation

“The People Demand Social Justice”A Case Study on the Impact of Protests on Financial Markets

Chernin

Lahav

2014

Accounting, Economics and Law

View full text Add to dashboard Cite

In Israel, the summer of 2011 will be remembered as the summer of social protestation. Steadily increasing food prices that showed no sign of abating motivated people across the nation to voice their discontent in massive weekly protests attended by thousands. As the movement gathered momentum and the impacts of the protests increased, it caught the attention of policy makers, food manufacturers, and food channel retailers. In this article, we show how certain important events during this summer negatively affected the price of food retailers' stocks. We also show that a proper response to the events by retailers targeted by the protestors prevented their stock from falling. We show that a proper response of one retailer converted the goal of protestors and increased its market value.

show abstract

“…The sign and rank test for event studies proposed by Corrado (1989) is used to supplement the parametric t-tests. The sign and rank test is regarded as more robust when there are deviations from normality, data outliers and date-variance increases (Donnelly, 2008;Kolari & Pynnönen, 2010;Corrado, 2011) 5 and is important for confirming the initial results from the ttests. Nevertheless, it must be stressed that event methodology does not prove a causal relationship between an event and changes in share prices.…”

Section: Equationmentioning

confidence: 99%

Assessing the potential impact of the Marikana incident on South African mining companies : an event method study

Hill

Maroun

2015

S. Afr. j. econ. manag. sci. (Online)

View full text Add to dashboard Cite

This study examines the potential impact of industrial unrest and the outbreak of violence at Marikana on 16 August 2012 on the share prices of mining companies listed on the Johannesburg Stock Exchange (JSE) using an event methodology. Contrary to expectations, the Marikana incident does not appear to have had a widespread and prolonged effect on the South African mining sector. This may be the result of the strike action already having been discounted into the price of mining shares, implying that the market was only reacting to the unusually violent (but short-lived) protest. Alternately, the results could be indicative of investor confidence in the corporate social responsibility initiatives of the South African mining industry as a whole.This paper is the first to examine the potential impact of the Marikana incident on the share prices of mining companies listed on the JSE. It should be of interest to both academics and practitioners wanting to understand how share prices react to exogenous events. It is also relevant for corporate-governance researchers concerned with the relevance of social and governance practices in a South African setting. This research is faced with the limitations associated with most statistical research: that causality cannot be ascribed to tested relationships. Notwithstanding these limitations, it is argued that these findings are important, given the significant coverage of the Marikana incident and the ongoing debate on the need for corporate social responsibility.

show abstract

Event Study Testing with Cross-sectional Correlation of Abnormal Returns

Cited by 499 publications

References 30 publications

Parametric and Nonparametric Event Study Tests: A Review

Parametric and Nonparametric Event Study Tests: A Review

“The People Demand Social Justice”A Case Study on the Impact of Protests on Financial Markets

Assessing the potential impact of the Marikana incident on South African mining companies : an event method study

Contact Info

Product

Resources

About