A Complete Nonparametric Event Study Approach

A Complete Nonparametric Event Study Approach Event studies have been used to examine the direction, magnitude, and speed of security price reactions to various phenomenon. Concerns over the lack of normality in stock return distributions motivated the introduction of nonparametric test statistics in the event study literature. A parametric procedure (OLS), however, has been extensively employed in the estimation of parameters for the market model. This paper, in contrast, applies Theil's nonparametric regression in the estimation of abnormal returns; an approach which is distribution free and provides a complete nonparametric approach for the detection of abnormal performance. Simulation results indicate Theil's estimation procedure offers a slight improvement in power in the detection of abnormal performance over the traditionally employed methodology. The results suggest employing Theil's nonparametric estimation procedure combined with the rank statistic. This complete nonparametric combination offers similar power with fewer underlying assumptions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

A Complete Nonparametric Event Study Approach

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2000 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008371810113
Publisher site
See Article on Publisher Site

References

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