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One For All or All For One? Using Multiple-listing Information in Event Studies

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Abstract

In an event study where at least some of the sample firms have their equity securities listed in more than one market, the question arises as to which is the most appropriate market (or markets) to use for the purpose of estimating mean abnormal returns. When arbitrage activity across these markets is restricted in some way, estimating abnormal returns from just one of the markets potentially throws away valuable information. On the other hand, indiscriminate pooling is likely to result in the same information being counted more than once. We develop a Generalized Least Squares estimator that (i) uses all the information available from multiple listings, (ii) ‘downweights’ listing observations that provide little new information, and (iii) yields efficient abnormal return estimates. Finally, we apply this generalized approach to a sample of Chinese foreign mergers and acquisitions and compare the results with conventional estimates of mean abnormal returns.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1133.pdf
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Bibliographic Info

Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 11/33.

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Length: 43 pages
Date of creation: 01 Nov 2011
Date of revision:
Handle: RePEc:cbt:econwp:11/33

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Keywords: event study; multiple listings; mergers and acquisitions; China;

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  1. Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2004. "Market Response to European Regulation of Business Combinations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(04), pages 731-757, December.
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