Event Studies: Event Studies Analyze Stock Market Reactions to Specific Events by Examining Abnormal Returns Around the Time of the Event.

EasyChair Preprint no. 12509

Abstract

Event studies are a widely used research methodology in finance that analyze stock market reactions to specific events by examining abnormal returns around the time of the event. This abstract provides a concise overview of the key aspects of event studies and their significance in understanding market reactions.

Event studies offer several advantages, including the ability to establish causality between events and stock market reactions, the objectivity of quantitative analysis, and the timeliness of insights provided. By isolating the event and studying abnormal returns, researchers can infer the impact of the event on stock prices.

However, event studies also have limitations and face certain challenges. Assumptions and limitations of statistical models, data availability and accuracy, generalizability of findings, and neglect of market microstructure effects are among the key limitations. Critics also raise concerns about market efficiency, data mining, and endogeneity.

Recent developments and future directions in event studies include high-frequency analysis, where researchers examine market reactions at smaller time intervals, and the utilization of machine learning techniques. Incorporating textual analysis and sentiment analysis from news articles, corporate announcements, and social media posts can enhance understanding of market sentiment and its impact on stock prices.

In conclusion, event studies are a valuable tool for analyzing stock market reactions to events. They aid in comprehending the impact of events on stock prices, investor behavior, and market efficiency. Future research should address limitations, refine statistical models, incorporate comprehensive data, and explore emerging techniques to further enhance the understanding of market reactions to events.

Keyphrases: Abnormal Returns, causality, data availability, Event studies, Generalizability, Market microstructure effects, quantitative analysis, Specific events, statistical models, Stock market reactions, Timeliness

@Booklet{EasyChair:12509,
  author = {Klaus Hubert and Abdul Jawwad},
  title = {Event Studies: Event Studies Analyze Stock Market Reactions to Specific Events by Examining Abnormal Returns Around the Time of the Event.},
  howpublished = {EasyChair Preprint no. 12509},

  year = {EasyChair, 2024}}