For an event study, can anyone explain me the daily value weighted return for a benchmark and the equally weighted return size adjusted for measuring the EARs and how to calculate both weights? Regards,
"Size adjusted return for company X" on day t is defined as the return of company X on day t minus the equal weighted return of all stocks in the same size decile as company X. So for example if company X is in the third NYSE size decile, you average together the returns of all third size decile companies (whether NYSE or not) on day t and you subtract this from the return of company X.
If you have several companies X, Y, Z, etc. then the "equal weighted size adjusted return" means you average together the size adjusted returns (computed as described above) for the companies X, Y, Z, etc.
The "value weighted return" for companies X, Y, Z, etc. is a weighted average of the returns of these companies, where the weights are the market capitalizations (price times shares outstanding) of these companies and the denominator is the total market capitalization of all included companies.