Managerial Decisions and Long-Term Stock Price Performance

  title={Managerial Decisions and Long-Term Stock Price Performance},
  author={Mark L. Mitchell and Erik Stafford},
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 multi-year 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 multi-year abnormal returns for event firms, producing test statistics that are… CONTINUE READING
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