event studies

Event Study

A study to determine what effect the release of information or its timing has on a security's price. Most analysts believe that information should be released in portions so that the market can price out good or bad information and reduce volatility. However, followers of the efficient markets hypothesis argue that doing that is unnecessary because information is reflected in the security's price immediately. Event studies help shed light on which school, if either, is correct; as with anything, there is the potential for bias within the study itself.

event studies

Research that attempts to determine if particular events produce abnormal returns from stock investments. For example, researchers have conducted event studies in an attempt to determine if stock splits, dividend increases, and earnings announcements produce abnormal returns.
References in periodicals archive ?
The Second Circuit rejected the notion that complicated event studies be submitted by Plaintiffs at the class certification stage, agreeing with plaintiffs that event studies offer the seductive promise of hard numbers and dispassionate truth, but methodological constraints limit their utility in the context of single-firm analyses.
The studies conducted to typically examine the market reactions to specific kind of announcements are called event studies.
Traditional event studies are designed to capture the financial market's expectation as to the overall performance results of mergers.
Prior catastrophe event studies focusing on insurers find that insurers generally experience negative abnormal returns as a result of their expected loss payments (Lamb, 1995; Cummins and Lewis, 2003; Doherty, Lamm-Tennant, and Starks, 2003).
Employing vector auto regressions (VARs), which may be better suited to the task than event studies, we find a consistently positive effect during the crisis era of general monetary policy variables on the financial markets, and clear effectiveness of some of the Fed's innovative policy actions.
Out of this total number of event studies, we observe significant values for the volatility index in 119 cases.
In most event studies, information leakage is a common concern because it occurs when a small group of investors obtains information regarding a relevant event prior to the official public release.
These issues include the relationship between materiality and price impact, the distinction between hypothetical versus actual changes in the total mix of information made available to the market, the use of event studies, and some lower courts ' refusal to consider certain types of economic evidence in the context of price impact arguments.
Kline, Event Studies for Merger Analysis: An Evaluation of the Effects of Non-Normality on Hypothesis Testing (Aug.
Moreover improvements can be observed in firms performance after top management changes in the empirical literature, identifying forced removal or departures is difficult, because press reports do not describe them as such since a removal or departure announced as a retirement may be in reality a forced resignation, thus making it difficult to carry out event studies aimed at determining it financial markets discipline firms for illegal corporate behaviour (corporate governance failure via falling share prices and firm value.