Interacting Biases, Non-Normal Return Distributions and the Performance of Tests for Long-Horizon Event Studies

@inproceedings{Cowan2000InteractingBN,
  title={Interacting Biases, Non-Normal Return Distributions and the Performance of Tests for Long-Horizon Event Studies},
  author={Arnold R. Cowan and Anne M. A. Sergeant},
  year={2000}
}
We report simulations, using actual stock return data, of statistical tests of long-horizon buy-and-hold stock returns. We use benchmark portfolios purged of new-listings and rebalancing biases, and find that many proposed tests are misspecified, due in part to skewness. The use of a single control firm instead of a portfolio still produces misspecification, particularly in large samples. We document an inverse relation between skewness bias and sample size, and also document an overlapping… CONTINUE READING

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