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A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

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  • Cyree, Ken B
  • DeGennaro, Ramon P

Abstract

We generalize traditional event-study techniques to allow for event-induced parameter shifts, shifting variances, and firm-specific event periods. Our method, which nests traditional methods, also permits systematic risk to change gradually during the event period and exit the period at higher or lower levels. We use our approach to study 123 banks that acquired other institutions between 1989 and 1995. We find a significant change in the systematic risk of the acquiring firms, significant ARCH effects, and an event period that ends before the date of the announcement. None of these results is detectable using conventional methods. Copyright 2002 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 19 (2002)
Issue (Month): 4 (December)
Pages: 399-416

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Handle: RePEc:kap:rqfnac:v:19:y:2002:i:4:p:399-416

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Web page: http://springerlink.metapress.com/link.asp?id=102990

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  1. DeGennaro, Ramon P. & Thomson, James B., 1995. "Anticipating bailouts: The incentive-conflict model and the collapse of the Ohio deposit guarantee fund," Journal of Banking & Finance, Elsevier, vol. 19(8), pages 1401-1418, November.
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  15. Madura, Jeff & Wiant, Kenneth J., 1994. "Long-term valuation effects of bank acquisitions," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1135-1154, December.
  16. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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Cited by:
  1. Christian Leuz & Catherine Schrand, 2009. "Disclosure and the Cost of Capital: Evidence from Firms’ Responses to the Enron Shock," NBER Working Papers 14897, National Bureau of Economic Research, Inc.
  2. Uhde, Andre & Farruggio, Christian & Michalak, Tobias C., 2013. "The light and dark side of TARP," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80004, Verein für Socialpolitik / German Economic Association.
  3. Uhde, André & Michalak, Tobias C., 2010. "Securitization and systematic risk in European banking: Empirical evidence," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 3061-3077, December.
  4. Thorsten Lübbers, 2009. "Is Cartelisation Profitable? A Case Study of the Rhenish Westphalian Coal Syndicate, 1893-1913," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2009_09, Max Planck Institute for Research on Collective Goods.
  5. Kyle Hyndman, 2005. "Status Quo Effects in Bargaining: An Empirical Analysis of OPEC," Industrial Organization 0511016, EconWPA.

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