Valid Inference in Single-Firm, Single-Event Studies

@article{Gelbach2012ValidII,
  title={Valid Inference in Single-Firm, Single-Event Studies},
  author={Jonah B. Gelbach and Eric Helland and Jonathan Klick},
  journal={Corporate Governance \& Law eJournal},
  year={2012}
}
Single-firm event studies play an important role in both scholarship and litigation despite the general invalidity of standard inference. We use a broad cross-section of 2000--2007 CRSP data and find that the standard approach performs poorly in terms of both Type I and Type II error rates. We discuss a simple-to-use alternative, the SQ test, based on sample quantiles of the empirical distribution of pre-event fitted excess returns, which has correct asymptotic Type I error rate. Results… Expand
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