Article1987

The Influence of Market Conditions on Event-Study Residuals

91 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Financial Markets and Investment Strategies Financial Analysis and Corporate Governance Financial Risk and Volatility Modeling

Abstract

This paper presents evidence that the mean-adjusted returns and raw-market returns models are misspecified when the event under investigation occurs during either bull or bear markets. To demonstrate this phenomenon, simulation techniques as well as an actual event are employed to examine the reliability of four different return-generating models. When the event occurs during a bull (bear) market, both the mean-adjusted and raw-market returns models produce upwardly (downwardly) biased positive (negative) abnormal returns. This results in statistically significant cumulative abnormal returns over selected preevent and postevent intervals. In contrast, both the market-adjusted and single-index models show far less evidence of any unusual price activity over these same intervals.

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1985Using daily stock returns 1980Measuring security price performance 1985The Effect of Voluntary Sell-Off Announcements on Shareholder Wealth 1977STABILITY TESTS FOR ALPHAS AND BETAS OVER BULL AND BEAR MARKET CONDITIONS 1984Investigating the Valuation Effects of Announcements of Voluntary Corporate Selloffs 1984Additional Evidence on the Relation Between Divestiture Announcements and Shareholder Wealth 1969Investment Analysis and Portfolio Management.1986The Timing and Substance of Divestiture Announcements: Individual, Simultaneous and Cumulative Effects

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2022Event studies in international finance research 2005SENSITIVITY OF INVESTOR REACTION TO MARKET DIRECTION AND VOLATILITY: DIVIDEND CHANGE ANNOUNCEMENTS 1991Market conditions, risk, and real estate portfolio returns: Some empirical evidence 1988Spin-offs and Sales of Assets: An Examination of Security Returns and Divestment Motivations 2013Market uncertainty, market sentiment, and the post-earnings announcement drift

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