Measuring long-horizon security price performance

Measuring long-horizon security price performance Our simulation results show that tests for long-horizon (i.e.. multi-year) abnormal security returns around firm-specific events are severely misspecified. The rejection frequencies using parametric tests sometimes exceed 30% when the significance level of the test is 5%. Our results are robust to many different abnormal-return models. Conclusions from long-horizon studies require extreme caution. Nonparametric and bootstrap tests are likely to reduce misspecification. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Measuring long-horizon security price performance

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Publisher
Elsevier
Copyright
Copyright © 1997 Elsevier Science S.A. All rights reserved
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(96)00899-9
Publisher site
See Article on Publisher Site

Abstract

Our simulation results show that tests for long-horizon (i.e.. multi-year) abnormal security returns around firm-specific events are severely misspecified. The rejection frequencies using parametric tests sometimes exceed 30% when the significance level of the test is 5%. Our results are robust to many different abnormal-return models. Conclusions from long-horizon studies require extreme caution. Nonparametric and bootstrap tests are likely to reduce misspecification.

Journal

Journal of Financial EconomicsElsevier

Published: Mar 1, 1997

References

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