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On the Statistical Significance of Event Effects on Unsystematic Volatility

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  • Jimmy E. Hilliard
  • Robert Savickas

Abstract

We develop a method for determining the significance of the effect of a certain event (stock split, corporate restructuring, change in regulation, etc.) on unsystematic volatility of asset returns. Simulations show that the suggested tests reject the true null hypothesis of no effect on volatility at appropriate levels, whereas the rejection rates of a false null hypothesis increase with the magnitude of the effect. An application of the method to corporate spin‐offs reveals statistically significant and long‐lasting estimated increases in unsystematic volatility of parent companies' returns.

Suggested Citation

  • Jimmy E. Hilliard & Robert Savickas, 2002. "On the Statistical Significance of Event Effects on Unsystematic Volatility," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(4), pages 447-462, December.
    • Handle: RePEc:bla:jfnres:v:25:y:2002:i:4:p:447-462
    DOI: 10.1111/1475-6803.00030
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    Cited by:

    1. Elisa Navarra, 2022. "Stock Market Response to Firms’ Misconduct," Working Papers ECARES 2022-40, ULB -- Universite Libre de Bruxelles.
    2. Refai, Hisham Al & Eissa, Mohamed Abdelaziz, 2017. "The impact of FIFA’s official announcements on the stock market of Qatar: The case of the 2022 World Cup," Research in International Business and Finance, Elsevier, vol. 41(C), pages 347-353.
    3. Mnasri, Ayman & Nechi, Salem, 2016. "Impact of terrorist attacks on stock market volatility in emerging markets," Emerging Markets Review, Elsevier, vol. 28(C), pages 184-202.
    4. Bialkowski, Jedrzej & Gottschalk, Katrin & Wisniewski, Tomasz Piotr, 2008. "Stock market volatility around national elections," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1941-1953, September.
    5. Chortareas, Georgios & Cipollini, Andrea & Eissa, Mohamed Abdelaziz, 2012. "Switching to floating exchange rates, devaluations, and stock returns in MENA countries," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 119-127.
    6. Essaddam, Naceur & Karagianis, John M., 2014. "Terrorism, country attributes, and the volatility of stock returns," Research in International Business and Finance, Elsevier, vol. 31(C), pages 87-100.
    7. Sun, Changyou & Rahman, Mohammad M. & Munn, Ian A., 2013. "Adjustment of stock prices and volatility to changes in industrial timberland ownership," Forest Policy and Economics, Elsevier, vol. 26(C), pages 91-101.
    8. Eshan Ahluwalia & Trilochan Tripathy & Ajay Kumar Mishra, 2023. "Measuring Volatility Persistence and Asymmetric Effects Around Index Rebalancing of Nifty Indices," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(5), pages 1-86, May.
    9. Kamphol Panyagometh, 2020. "The Effects of Pandemic Event on the Stock Exchange of Thailand," Economies, MDPI, vol. 8(4), pages 1-22, October.

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