An Event study is a statistical method to assess the impact of an event on the value of a firm. For example, the announcement of a merger between two business entities can be analyzed to see whether investors believe the merger will create or destroy value. The basic idea is to find the abnormal return attributable to the event being studied by adjusting for the return that stems from the price fluctuation of the market as a whole.
As the event methodology can be used to elicit the effects of any type of event on the direction and magnitude of stock price changes, it is very versatile. Event studies are thus common to various research areas, such as accounting and finance, management, economics, marketing, information technology, law, and political science.
One aspect oftentimes used to structure the overall body of event studies is the breath of the studied event types. On the one hand, there is research investigating the stock market responses to economy-wide events (i.e., market shocks, such as regulatory changes, or catastrophic events). On the other hand, event studies are used to investigate the stock market responses to corporate events, such as mergers and acquisitions, earnings announcements, debt or equity issues, corporate reorganisations, investment decisions and corporate social responsibility (MacKinlay 1997; McWilliams & Siegel, 1997).
Read more about Event Study: Motivation, Methodologies, Application To Merger Analysis
Famous quotes containing the words event and/or study:
“The frequency of personal questions grows in direct proportion to your increasing girth. . . . No one would ask a man such a personally invasive question as “Is your wife having natural childbirth or is she planning to be knocked out?” But someone might ask that of you. No matter how much you wish for privacy, your pregnancy is a public event to which everyone feels invited.”
—Jean Marzollo (20th century)
“What is more subtle than this which ties me to the woman or man
that looks in my face?
Which fuses me into you now, and pours my meaning into you?
We understand men do we not?
What I promis’d without mentioning it, have you not accepted?
What the study could not teach—what the preaching could
not accomplish is accomplish’d, is it not?”
—Walt Whitman (1819–1892)