Single-firm inference in event studies via the permutation test

Phuong Anh Nguyen and Michael Wolf

No 425, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: Return event studies generally involve several firms but there are also cases when only one firm is involved. This makes the relevant testing problems, abnormal return (AR) and cumulative abnormal return (CAR), more difficult since one cannot exploit the multitude of firms (by using a relevant central limit theorem, say) to design hypothesis tests. We propose a permutation test which is of nonparametric nature and more generally valid than the tests that have previously been proposed in the literature in this context. We address the question of the power of the test via a brief simulation study and also illustrate the method with two applications to real data.

Keywords: Cumulative abnormal return; event study; permutation test (search for similar items in EconPapers)
JEL-codes: C12 G14 (search for similar items in EconPapers)
Date: 2023-01, Revised 2023-11
New Economics Papers: this item is included in nep-ecm
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