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Reusing Natural Experiments

Author

Listed:
  • Heath, Davidson

    (University of Utah David Eccles School of Business)

  • Ringgenberg, Matthew C.

    (University of Utah - Department of Finance)

  • Samadi, Mehrdad

    (Southern Methodist University (SMU) - Finance Department)

  • Werner, Ingrid M.

    (The Ohio State University - Fisher College of Business)

Abstract

Natural experiments are used in empirical research to make causal inferences. After a natural experiment is first used, other researchers often reuse the setting, examining different outcomes based on causal chain arguments. Using simulation evidence combined with two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we show that the repeated use of a natural experiment significantly increases the likelihood of false discoveries. To correct this, we propose multiple testing methods which account for dependence across tests and we show evidence of their efficacy.

Suggested Citation

  • Heath, Davidson & Ringgenberg, Matthew C. & Samadi, Mehrdad & Werner, Ingrid M., 2019. "Reusing Natural Experiments," Working Paper Series 2019-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  • Handle: RePEc:ecl:ohidic:2019-21
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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