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Decomposing abnormal returns in stochastic linear models

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  • Lin, Carl
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Abstract

This paper presents a method helpful in analyzing the sources of return in an event study. A generalized decomposition result derived from the differential between two random linear functions attributes the effect of events or regulations on the value of firms to differences in economy-wide and individualistic factors. In aggregate decomposition, the abnormal return in the existing literature is equivalent to the coefficient effects. As an example, I take the market model in Card and Krueger (1995) showing that this approach helps provide additional insights.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 143-147

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:143-147

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Abnormal returns; Oaxaca decomposition; Event study; Market model;

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  1. Yun, Myeong-Su, 2003. "Decomposing Differences in the First Moment," IZA Discussion Papers 877, Institute for the Study of Labor (IZA).
  2. Gerald G. Brown & Herbert C. Rutemiller, 1977. "Means and Variances of Stochastic Vector Products with Applications to Random Linear Models," Management Science, INFORMS, vol. 24(2), pages 210-216, October.
  3. Ben Jann, 2005. "Standard Errors for the Blinder-Oaxaca Decomposition," German Stata Users' Group Meetings 2005 03, Stata Users Group.
  4. Daniel A. Powers & Hirotoshi Yoshioka & Myeong-Su Yun, 2011. "mvdcmp: Multivariate decomposition for nonlinear response models," Stata Journal, StataCorp LP, vol. 11(4), pages 556-576, December.
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