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A Simulation Investigation of Firm-Specific Equation Models as Used in Accounting Information Event Studies

Author

Listed:
  • Walter Teets

    (UIUC)

  • Robert P. Parks

    (Washington University)

Abstract

Researchers studying stock price reactions to accounting information releases can choose among several statistical methods/models. We investigate the empirical distribution of common statistics used in SUR and OLS estimation via monte-carlo methods on daily stock return data. We find that the SUR statistics over reject the null hypothesis far too often and in fact the commonly used SAS F-statistic rejects the null more often than other related statistics. We give some indication of the amount of correction needed and also the corrected power statistics.

Suggested Citation

  • Walter Teets & Robert P. Parks, 1993. "A Simulation Investigation of Firm-Specific Equation Models as Used in Accounting Information Event Studies," Econometrics 9307001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:9307001
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    References listed on IDEAS

    as
    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    2. Teets, W, 1992. "The Association Between Stock-Market Responses To Earnings Announcements And Regulation Of Electric Utilities," Journal of Accounting Research, Wiley Blackwell, vol. 30(2), pages 274-285.
    3. Malatesta, Paul H., 1986. "Measuring Abnormal Performance: The Event Parameter Approach Using Joint Generalized Least Squares," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(1), pages 27-38, March.
    4. Schipper, K & Thompson, R, 1985. "The Impact Of Merger-Related Regulations Using Exact Distributions Of Test Statistics," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 408-415.
    5. McDonald, Bill, 1987. "Event Studies and Systems Methods: Some Additional Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(4), pages 495-504, December.
    6. Dyckman, T & Philbrick, D & Stephan, J, 1984. "A Comparison Of Event Study Methodologies Using Daily Stock Returns - A Simulation Approach," Journal of Accounting Research, Wiley Blackwell, vol. 22, pages 1-30.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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