A new event study method to forecast stock returns: The case of Facebook

Tiffany Hui-Kuang Yu and Kun-Huang Huarng

Journal of Business Research, 2020, vol. 115, issue C, 317-321

Abstract: This study proposes a new event study method to forecast abnormal returns for individual companies in order to overcome the limitations of current related approaches. We consider two criteria to determine whether there are abnormal returns: individual stock performance and relative performance between an individual stock and the market. We first use in-sample data of Facebook’s stock prices between 2017/1/1 and 2018/6/30 to build rules and then employ those rules to forecast its out-of-sample data between 2018/7/1 and 2018/12/31. The empirical analysis shows that our new method accurately forecasts 4 out of 5 negative CNN news items for Facebook. The proposed new method contributes to the literature on case study methods by utilizing a new way to define abnormal returns and to forecast events successfully.

Keywords: Abnormal returns; Facebook; Forecasting, thresholds (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:115:y:2020:i:c:p:317-321

DOI: 10.1016/j.jbusres.2019.11.006

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