Recursive Estimation for Normal (or Expected) Returns

Jau-Lian Jeng
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Jau-Lian Jeng: Azusa Pacific University

Chapter Chapter 4 in Analyzing Event Statistics in Corporate Finance, 2015, pp 121-134 from Palgrave Macmillan

Abstract: Abstract Given that the updating information continue flowing into the capital market, modification on the model specifications of systematic components of normal returns are necessary for further discussions on firm-specific abnormal returns. In this chapter, since all models that approximate normal returns are prone to time-varying parameters, some recursive estimation methods are shown to cope with this nature. Given that the systematic components of asset returns can be approximated by proposed (time-varying coefficient) theoretical models of nondiversifiable variables or proxies, all the model specifications are similar to the adaptive filters for the data stream.

Keywords: Stock Return; Tracking Error; Abnormal Return; Normal Return; Recursive Algorithm (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-49160-2_4

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DOI: 10.1057/9781137491602_4

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