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Event‐Induced Volatility and Tests for Abnormal Performance

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  • Robert Savickas

Abstract

I analyze a simple test statistic for mean abnormal returns in the presence of stochastic volatility during both event and nonevent windows and in the presence of event‐induced variance increases. Unlike previous tests, the parametric test evaluated here does not require that the volatility effect of the event be the same across all securities. Simulations show that the test exhibits nontrivial gains in power over previously developed parametric and nonparametric tests, and the true null hypothesis is rejected at appropriate levels.

Suggested Citation

  • Robert Savickas, 2003. "Event‐Induced Volatility and Tests for Abnormal Performance," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(2), pages 165-178, June.
    • Handle: RePEc:bla:jfnres:v:26:y:2003:i:2:p:165-178
    DOI: 10.1111/1475-6803.00052
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