Future long-horizon performance measurement conditional on past survival

Gray, Philip and Whittaker, Mark (2003) Future long-horizon performance measurement conditional on past survival. International Review of Finance, 4 1-2: 29-48. doi:10.1111/j.1369-412X.2003.00042.x

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Author Gray, Philip
Whittaker, Mark
Title Future long-horizon performance measurement conditional on past survival
Journal name International Review of Finance   Check publisher's open access policy
ISSN 1369-412X
Publication date 2003
Sub-type Article (original research)
DOI 10.1111/j.1369-412X.2003.00042.x
Volume 4
Issue 1-2
Start page 29
End page 48
Total pages 20
Editor S. Titman
Place of publication Oxford, UK
Publisher Blackwells
Collection year 2005
Language eng
Subject CX
350301 Finance
710401 Finance and investment services
Abstract This paper examines the measurement of long-horizon abnormal performance when stock selection is conditional on an extended period of past survival. Filtering on survival results in a sample driven towards more-established, frequently traded stocks and this has implications for the choice of benchmark used in performance measurement (especially in the presence of the well-documented size effect). A simulation study is conducted to document the properties of commonly employed performance measures conditional on past survival. The results suggest that the popular index benchmarks used in long-horizon event studies are severely biased and yield test statistics that are badly misspecified. In contrast, a matched-stock benchmark based on size and industry performs consistently well. Also, an eligible-stock index designed to mitigate the influence of the size effect proves effective.
Q-Index Code CX

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
UQ Business School Publications
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Created: Wed, 15 Aug 2007, 05:25:49 EST