An Evaluation of Testing Procedures for Event Study

Abstract

This paper analyses efficiency of short horizon event study methodology in general and efficiency of various test statistics based on price and trading volume in the period (Iranian calendar) 1380:1389-q1 (2240 days) applying simulation method. We evaluate efficiency of 8 test statistics including parametric, non-parametric and induced variance statistics. We find various test statistics have enough power to detect abnormal return. One should not expect consistently detect abnormal returns of less than 1 percent.

Keywords

• event study
• trading volume
• abnormal return
• test statistic
• simulation