The bond event study methodology since 1974
Published online: 17 March 2016
Ó Springer Science+Business Media New York 2016
Abstract In the spirit of methodology reviews for stock event studies, like the one
prepared by Binder (Rev Quant Financ Account 11:111–137, 1998), this paper discusses
the development of the event study methodology for corporate bonds since its ﬁrst
application with Katz (J Financ 29:551–559, 1974). The motivation to conduct this review
stems from two sources: First, the methodology utilized for stocks cannot simply be
applied to bonds, as bonds present several features that strongly distinguish them from
stocks. An erroneous model could lead to false conclusions about the impact of new
information on a ﬁrm’s debt. Second, the availability of new sources for bond data enables
the application of bond event studies for an increasing number of research frameworks.
Thus, future research ought to be interested in the selection of the proper methodology.
Consequently, this paper illustrates past and present event study methods utilized to cal-
culate abnormal bond returns and reviews the applied parametric and non-parametric test
statistics. Besides, insight on how the availability of corporate bond data has evolved
through the last four decades, as well as the impact on prevailing methodology is provided.
Altogether, this paper provides a ﬁrst extensive snapshot of the current bond event study
methodology and offers guidance for future research.
Keywords Bond event study Á Bonds Á Abnormal returns Á Methodology review
JEL Classiﬁcation G12 Á G14
& Daniel Maul
Department of Corporate Finance, Technische Universita
t Darmstadt, Hochschulstrasse 1,
64289 Darmstadt, Germany
Rev Quant Finan Acc (2017) 48:749–787