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Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement

Author

Listed:
  • Andrew Phin
  • Todd Prono
  • Jonathan J. Reeves
  • Konark Saxena

Abstract

Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its abnormal returns are largely realized on the first day. The abnormal returns in the remaining post event period, which show up as a drift using standard methodology, are attributed to level shifts in beta.

Suggested Citation

  • Andrew Phin & Todd Prono & Jonathan J. Reeves & Konark Saxena, 2018. "Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement," Finance and Economics Discussion Series 2018-081, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2018-81
    DOI: 10.17016/FEDS.2018.081
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    References listed on IDEAS

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    More about this item

    Keywords

    Event studies; Intraday returns; Systematic risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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