How to apply the event study methodology in STATA: An overview and a step-by-step guide for authors

Ullah, Subhan; Zaefarian, Ghasem; Ahmed, Rizwan Raheem; Kimani, Danson

doi:10.1016/j.indmarman.2021.02.004

Cited by 31 publications

(10 citation statements)

References 49 publications

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“…The event study methodology (El Ghoul et al , 2023; Ullah et al , 2021) was used to investigate if firms’ product launch events given antecedent signaling situations affect stock prices. This method assumes strongly efficient financial markets, i.e.…”

Section: Methodsmentioning

confidence: 99%

Does the economic value of new product announcements depend upon preannouncement signals? An empirical test of information asymmetry theories

Mishra

Dalman

2023

JPBM

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Purpose Signals, e.g. information released by firms about new products attract the attention and scrutiny of customers, competitors and other stakeholders. In product management, an important area of research focuses on the economic value of such signals. However, extant studies consider valuation effects of product signals independently, and largely ignore how the value of a product signal at launch depends upon prior preannouncements. This study aims to investigate how the dependence of new product development (NPD) signals on past preannouncements affects firms’ security prices. Design/methodology/approach The study develops a conceptual model that draws upon information asymmetry theories, i.e. signaling and agency theory to hypothesize the effect of firms’ product introduction announcements on security prices given two antecedent preannouncement types (costless and costly signals). Hypotheses are tested by conducting an event study analysis on a sample of 149 matched observations (product introduction announcement preceded by a certain type of preannouncement). Findings Empirical results confirm the hypothesis that positive valuation effects are observed during product launch that is preceded by initial costless product signaling. In contrast, for ex ante costly product signaling, launch events are not diagnostic enough to affect value. Since organizations’ NPD communications can revise investors’ prior beliefs, they need to be understood in more detail and managed strategically. Research limitations/implications Valuation metrics can be noisy with a potential to influence information events. In addition, product introduction signals may be deployed more frequently in certain fast-paced industries, e.g. hi-tech. Practical implications Managers can incorporate signal dependence in product communications. For example, in costless ex ante product signaling situations, initial economic loss may be recovered through launch announcements. Furthermore, when costly signals have been used earlier, firms may economize on promotion costs during launch. Originality/value Past research has focused on assessing the economic value of new product signals independently, i.e. as discrete events. Absent is an examination of valuation effects due to the dependence of launch signals on prior preannouncements. This paper addresses the dependence gap, and empirical results show that even if firms do not deploy product signals ex ante, value can be created through ex post launch announcements.

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Section: Methodsmentioning

confidence: 99%

Does the economic value of new product announcements depend upon preannouncement signals? An empirical test of information asymmetry theories

Mishra

Dalman

2023

JPBM

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“…However, (Brown & Warner, 1980, 1985Mackinlay, 1997) provide evidence that the results generated by different models are similar. Recent studies support the use of the market model in event studies (Anh & Gan, 2020;Pandey & Jaiswal, 2017;Pandey & Kumari, 2020b, 2020cPhuong, 2021;Ullah et al, 2021). So, we use the market model for estimating the normal returns, 𝑵𝑹 𝒄𝒕 , of the cryptocurrency 'c', on day 't', as follows:…”

Section: Average Abnormal Returnsmentioning

confidence: 99%

Impacts of the global pandemic on returns and volatilities of cryptocurrencies

Kumar

Kumari

2022

IJABF

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Employing the standard event study methodology and the OLS market model to examine how the global pandemic announcement impacted cryptocurrencies, we test the null hypotheses that "the global pandemic declaration did not significantly impact the abnormal returns of the cryptocurrencies", and "during the global pandemic declaration, the cryptocurrencies did not experience any significant abnormal volatilities". The average abnormal return on t-2 was nearly minus 40 percent, which is the highest negative value during the 61-day event window. The cumulative average returns are significantly negative during the event window. The global pandemic news has significantly impacted cryptocurrencies and are more volatile during the outbreak. The study's findings will empower the investors to implement proper investment strategies during emergencies.

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“…Although it has been nearly 90 years since the event research method was put forward, it is still one of the most commonly used methods in empirical research and analysis, although this method still has some shortcomings, but with the development of the research, it becomes more and more perfect. Like Caves, R. E. said, the event study method is a simple and effective method, its theory is very rigorous, easy to operate, can avoid some follow-up problems, this method should have a place in the academic community [12].…”

Section: Event Studymentioning

confidence: 99%

The Impact of Russia-Ukraine Conflict on Chinese Military Industry Sector -Based on Event Study

Chen¹,

Deng²,

Li³

2022

BCPBM

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The conflict between Russia and Ukraine has had a tremendous impact on the world economy. This paper uses the event study and selects 51 military enterprises in Shanghai and Shenzhen from February 14 to March 4, 2022. The date of the event was set as February 15, and within eight days of the event, the CAAR as a whole was positive. So, the Russia-Ukraine conflict on the Chinese military industry sector had a positive impact, but the impact of the shorter duration, was mainly affected by investor sentiment, and the overall performance of hedging demand. In the long run, the military industry sector will still be driven by fundamentals. Investors need to include the Chinese military industry sector in their portfolios to avoid the risk of geopolitical conflict. It is also important to note that due to the relatively short duration of events, the portfolio needs to be dynamically adjusted and the risk of late price declines cannot be ignored.

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How to apply the event study methodology in STATA: An overview and a step-by-step guide for authors

Cited by 31 publications

References 49 publications

Does the economic value of new product announcements depend upon preannouncement signals? An empirical test of information asymmetry theories

Does the economic value of new product announcements depend upon preannouncement signals? An empirical test of information asymmetry theories

Impacts of the global pandemic on returns and volatilities of cryptocurrencies

The Impact of Russia-Ukraine Conflict on Chinese Military Industry Sector -Based on Event Study

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