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Long-run performance evaluation: Correlation and heteroskedasticity-consistent tests

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  • Jegadeesh, Narasimhan
  • Karceski, Jason

Abstract

Although there is an extensive literature that evaluates long-run stock returns, the statistical tests that are commonly used are misspecified when event firms share common characteristics. For example, industry clustering or overlapping returns in the sample contribute to test misspecification. We propose a new test of long-run performance that allows for heteroskedasticity and autocorrelation. Our tests are well-specified in random samples and in samples with industry clustering and with overlapping returns.

Suggested Citation

  • Jegadeesh, Narasimhan & Karceski, Jason, 2009. "Long-run performance evaluation: Correlation and heteroskedasticity-consistent tests," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 101-111, January.
    • Handle: RePEc:eee:empfin:v:16:y:2009:i:1:p:101-111
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    8. Wolfgang Bessler & Wolfgang Drobetz & Martin Seim & Jan Zimmermann, 2016. "Equity Issues and Stock Repurchases of Initial Public Offerings," European Financial Management, European Financial Management Association, vol. 22(1), pages 31-62, January.
    9. Mark Mietzner, 2017. "Why do firms decide to stop their share repurchase programs?," Review of Managerial Science, Springer, vol. 11(4), pages 815-855, October.
    10. Anupam Dutta & David McMillan, 2015. "Improved calendar time approach for measuring long-run anomalies," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1065948-106, December.
    11. Dutta, Anupam & Knif, Johan & Kolari, James W. & Pynnonen, Seppo, 2018. "A robust and powerful test of abnormal stock returns in long-horizon event studies," Journal of Empirical Finance, Elsevier, vol. 47(C), pages 1-24.
    12. Yusnidah Ibrahim & Md Mohan Uddin & Kamarun Nisham Taufil Mohd & Mohd Sobri Minai, 2013. "Agency Costs and the Long-Run Performance of Debt Issuers," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 67-87.
    13. Wolfgang Bessler & Wolfgang Drobetz & Julian Holler, 2015. "The Returns to Hedge Fund Activism in Germany," European Financial Management, European Financial Management Association, vol. 21(1), pages 106-147, January.
    14. Zhi Da & Ravi Jagannathan & Jianfeng Shen, 2012. "Building Castles in the Air: Evidence from Industry IPO Waves," NBER Working Papers 18555, National Bureau of Economic Research, Inc.
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