Nonparametric tests for event studies under cross-sectional dependence

Matteo Pelagatti

No 244, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: We propose three nonparametric tests for the null of no eventinduced shifts in the distribution of stock returns. One test is the natural extension of the popular Corrado rank test to the case of crosssectionally dependent returns, while the other two are based on new ideas. Unfortunately only for one of these tests a solid theory for approximating the distribution of the statistic can be derived, but some simulation experiments confirm that normality is a good approximation also for the other two. The new tests are compared to a widely used parametric test (Patell) through simulation experiments and are shown to compare favourably in terms of power. Simulation results are based on bootstrapping daily stock returns from the S&P100 and NASDAQ indexes.

Keywords: Rank test; Event study; Abnormal returns; Cross-sectional dependence (search for similar items in EconPapers)
JEL-codes: C12 C14 G14 (search for similar items in EconPapers)
Pages: 20
Date: 2013-05, Revised 2013-05
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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