Robust inference in single firm/single event analyses

Ralf Elsas and Daniela Stephanie Schoch

Journal of Corporate Finance, 2023, vol. 80, issue C

Abstract: Single firm/single event (SFSE) studies are relevant in corporate finance. Since inference on abnormal returns in this context necessarily relies on the time series variance of these abnormal returns, the implied problem of heteroscedasticity is obvious, although hard to solve. We analyze robust inference in an SFSE setting using Monte Carlo and resampling experiments. Estimation is biased when the calibration and event period occur in different volatility regimes. We develop a unique specification test for these structural breaks. The most robust inference is obtained by using intraday data and a multiplicative component GARCH estimator.

Keywords: Event studies; Inference; Monte Carlo simulation; Volatility; Structural breaks (search for similar items in EconPapers)
JEL-codes: C12 C15 G14 K41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:80:y:2023:i:c:s0929119923000408

DOI: 10.1016/j.jcorpfin.2023.102391

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