MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD

Following the Brown-Warner simulation approach and using Chilean daily security returns data, we examine the specification and power of three parametric t-tests commonly used in event studies: the standardized, the cross-sectional and the portfolio t-test. Our findings show that even though symptoms...

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Autores principales:	SAENS,RODRIGO, SANDOVAL,EDUARDO
Lenguaje:	English
Publicado:	Instituto de Economía, Pontificia Universidad Católica de Chile 2005
Materias:	Event Studies Method Specification Tests
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212005012600005
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spelling	oai:scielo:S0717-682120050126000052006-03-15MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHODSAENS,RODRIGOSANDOVAL,EDUARDO Event Studies Method Specification Tests Following the Brown-Warner simulation approach and using Chilean daily security returns data, we examine the specification and power of three parametric t-tests commonly used in event studies: the standardized, the cross-sectional and the portfolio t-test. Our findings show that even though symptoms of nonnormality in security returns and security abnormal returns persist even at the portfolio level, methods based on the use of parametric tests for samples of ten or more securities are well specified, at least at a significance level of 5%. In terms of power, our simulation results show the standardized t-test is always more effective in detecting the presence of an abnormal return than its two competitors: the cross-sectional and the portfolio t-test. We also find, however, that the power of the three t-tests is very sensitive to both the sample size and the length of the event period. In particular, conclusions from event studies conducted in the Latin American equity market involving multiday event periods have to be taken with cautioninfo:eu-repo/semantics/openAccessInstituto de Economía, Pontificia Universidad Católica de ChileCuadernos de economía v.42 n.126 20052005-11-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212005012600005en10.4067/S0717-68212005012600005
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Event Studies Method Specification Tests
spellingShingle	Event Studies Method Specification Tests SAENS,RODRIGO SANDOVAL,EDUARDO MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
description	Following the Brown-Warner simulation approach and using Chilean daily security returns data, we examine the specification and power of three parametric t-tests commonly used in event studies: the standardized, the cross-sectional and the portfolio t-test. Our findings show that even though symptoms of nonnormality in security returns and security abnormal returns persist even at the portfolio level, methods based on the use of parametric tests for samples of ten or more securities are well specified, at least at a significance level of 5%. In terms of power, our simulation results show the standardized t-test is always more effective in detecting the presence of an abnormal return than its two competitors: the cross-sectional and the portfolio t-test. We also find, however, that the power of the three t-tests is very sensitive to both the sample size and the length of the event period. In particular, conclusions from event studies conducted in the Latin American equity market involving multiday event periods have to be taken with caution
author	SAENS,RODRIGO SANDOVAL,EDUARDO
author_facet	SAENS,RODRIGO SANDOVAL,EDUARDO
author_sort	SAENS,RODRIGO
title	MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
title_short	MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
title_full	MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
title_fullStr	MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
title_full_unstemmed	MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD
title_sort	measuring security price performance using chilean daily stock returns: the event study method
publisher	Instituto de Economía, Pontificia Universidad Católica de Chile
publishDate	2005
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212005012600005
work_keys_str_mv	AT saensrodrigo measuringsecuritypriceperformanceusingchileandailystockreturnstheeventstudymethod AT sandovaleduardo measuringsecuritypriceperformanceusingchileandailystockreturnstheeventstudymethod
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MEASURING SECURITY PRICE PERFORMANCE USING CHILEAN DAILY STOCK RETURNS: THE EVENT STUDY METHOD

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