Questions tagged [abnormal-returns]

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Why can we assume that asset return rates are normally (or lognormally) distributed?

In many theories of financial mathematics it is assumed that asset return rates are normally distributed (e.g. VaR models) or lognormally distributed (e.g. Black-Scholes model). In practice, asset ...
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0answers
30 views

Running regression to analyse how leverage changes around

I am running a single variable regression with BHAR returns as independent variable and Leverage as dependent variable. I would like to analyse does the leverage 1 year prior to IPO and 1 year after ...
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0answers
33 views

Negative abnormal stock return and permanent impact

Assume we have a day where stock price falls many standard deviations of the mean (e.g >3) . How could we test, in terms of time-series, if this negative shock is permanent or deminishes in the long ...
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41 views

Generate P Value from stationary bootstrap following Politis & Romano (1994)

For my master thesis I am analyzing the performance of trading strategies. For this I need to avoid data snooping by utilising the FDR approach. I follow closely the procedure presented by Bajgrowicz &...
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2answers
103 views

EuroStoxx50: long index and short futures

If you look at a cumulative return of a very simple portfolio, consisting of long EuroStoxx50 total return index and short EuroStoxx50 futures, you can see that over the last 10 years this portfolio ...
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1answer
232 views

Optimize portfolio of non-normal binary return assets

I am facing t = 1,..T investment periods where each period I have x$ to invest. Suppose each period I can build a portfolio from thousands of assets (some are uncorrelated whilst some are highly ...
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0answers
15 views

Factors affecting magnitude of responsiveness to acquisition announcements?

I have a dataset of stock returns immediately following rumors of or confirmations of acquisitions. It is clear that either the stock does not react, or the stock experiences a strong positive return ...
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1answer
2k views

Computing Buy-and-hold abnormal returns (BHARs) $= \prod_{t=\tau_1}^{\tau_2}(1+R_{i,t}) - \prod_{t=\tau_1}^{\tau_2}(1+R_{m,t})$

I am doing an event study and wanted to know if was going about this correctly$$ \text{BHAR}_{i(\tau_1,\tau_2)}\quad=\quad\prod_{t=\tau_1}^{\tau_2}(1+R_{i,t})~-~\prod_{t=\tau_1}^{\tau_2}(1+R_{m,t}) $$ ...
1
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1answer
234 views

Fame-French alpha for a single stock

I want to study the impact of corporate culture on risk-adjusted stock returns. After quantifying corporate culture I wanted to use panel methodology (I have a sample of 100 S&P500 companies over ...
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3answers
549 views

Interpretation of t-test in event study with dummy regression

I am not sure about my interpretation of the t-ratios in dummy regression models for event studies. I have the results for two different groups of models examining the impact of news on stock returns ...