Managerial Decisions and Long-Term Stock Price Performance
A rapidly growing literature claims to reject the efficient market hypothesis by producing large estimates of long-term abnormal returns following major corporate events. The preferred methodology in this literature is to calculate average multiyear buy-and-hold abnormal returns and conduct inferences via a bootstrapping procedure. We show that this methodology is severely flawed because it assumes independence of multiyear abnormal returns for event firms, producing test statistics that are up to four times too large. After accounting for the positive cross-correlations of event-firm abnormal returns, we find virtually no evidence of reliable abnormal performance for our samples. Copyright 2000 by University of Chicago Press.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Jun 1997|
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Web page: http://gsbwww.uchicago.edu/fac/finance/papers/
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