Improved methods for tests of long-run abnormal stock returns

Lyon, John D., Barber, Brad M. and Tsai, Chih-Ling (1999) Improved methods for tests of long-run abnormal stock returns. Journal of Finance, 54 1: 165-201. doi:10.1111/0022-1082.00101

Author Lyon, John D.
Barber, Brad M.
Tsai, Chih-Ling
Title Improved methods for tests of long-run abnormal stock returns
Journal name Journal of Finance   Check publisher's open access policy
ISSN 1540-6261
Publication date 1999-02-01
Sub-type Article (original research)
DOI 10.1111/0022-1082.00101
Open Access Status Not yet assessed
Volume 54
Issue 1
Start page 165
End page 201
Total pages 37
Place of publication Hoboken, NJ, United States
Publisher Wiley-Blackwell Publishing
Language eng
Formatted abstract
We analyze tests for long-run abnormal returns and document that two approaches yield well-specified test statistics in random samples. The first uses a traditional event study framework and buy-and-hold abnormal returns calculated using carefully constructed reference portfolios. Inference is based on either a skewness-adjusted t-statistic or the empirically generated distribution of long-run abnormal returns. The second approach is based on calculation of mean monthly abnormal returns using calendar-time portfolios and a time-series t-statistic. Though both approaches perform well in random samples, misspecification in nonrandom samples is pervasive. Thus, analysis of long-run abnormal returns is treacherous.
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ
Additional Notes Version of Record online: 6 MAY 2003

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 574 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 764 times in Scopus Article | Citations
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Created: Thu, 10 Nov 2016, 00:00:42 EST by Karen Morgan on behalf of UQ Business School