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 porfolio t-test. our findings show that even though symptoms of non-normality in security returns and security abnormal returns persist even at the portfolio level, methos 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 that its two competitors: the cross-sectional and the portfolio t-test. We also find, however, that the power of the three t-tests is vvery sensitive to both the sample size and the lenght 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.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: