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Conducting event studies on a small stock exchange

Jan Bartholdy, Dennis Olson and Paula Peare ()
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Paula Peare: Department of Business Studies, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark

No F-2006-03, Finance Research Group Working Papers from University of Aarhus, Aarhus School of Business, Department of Business Studies

Abstract: This paper analyses whether it is possible to perform an event study on a small stock exchange with thinly trade stocks. The main conclusion is that event studies can be performed provided that certain adjustments are made. First, a minimum of 25 events appears necessary to obtain acceptable size and power in statistical tests. Second, trade to trade returns should be used. Third, one should not expect to consistently detect abnormal performance of less than about 1% (or perhaps even 2%), unless the sample contains primarily thickly traded stocks. Fourth, nonparametric tests are generally preferable to parametric tests of abnormal performance. Fifth, researchers should present separate results for thickly and thinly traded stock groups. Finally, when nonnormality, event induced variance, unknown event day, and problems of very thin trading are all considered simultaneously, no one test statistic or type of test statistic dominates the others

Keywords: Event studies; Thin trading (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006-04-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Conducting Event Studies on a Small Stock Exchange (2007) Downloads
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