company event study statistics/finance assignment


The objective of this assignment is to see if a specific chosen event can affect the returns of that company. Make sure that you provide information about the event and the company. Choose a company and event. I suggest that the company be a public company, you can even choose the company you have previously chosen if you want. Decide your event window, pre-event, and postevent. 

Step 1: 

Define your event: Give information about this event. How do you think the performance of the company will be affected by the company even before analyzing the data and doing any test? What type of events is this, was this event expected, or was it a surprise? 

Step 2: 

Identify event date and define event window: After choosing event, the first step is to identify the event date. Although, this may sound simple, it requires some thought. The event date is defined as the time when the market first learns of the event. Once you have identified the date on which the event occurred, the next step is to define the number of trading periods (usually days) preceding and following that date to include in the event window. In your project, you should include enough days in the event window to pick up the effects of leakage. The estimation period is the period over which no event has occurred. 

Step 3: 

Collect daily data: You can find data from company on yahoo finance, use S7P 500 as your market return. Make sure that there is data available for both pre and post event on that company!! If the data you have collected is in prices, transform them into returns. You can highlight the event window and highlight the actual date of the event. - Graph the trend of prices and returns. By looking at the graph, does the event seem to affect performance? - Find the mean and standard deviation of the whole sample. Now find the mean & std. deviation of pre-window and compare it to the post window. Is there any noticeable difference in mean? Do a t-test to see if there is a difference of mean (use the unknown population variances or equal t-test formula.) 

Step 4: 

Methodology: Run regression. Use the market model. Using the pre-window, find the intercept and slope. Using that information, what is the expected return of the companies during the window? What is the difference between actual return and expected return (abnormal return)? Do t-test on AR for the window. Is the t-test significant? Explain your results. Was your company affect by the event? Was this consistent with your hypothesis? Calculate CARs. - For Robustness, use the CAPM model and a multiple regression model. What are the results? Is it consistent with the market model, or was it different? Which model and result should you believe in most? 

Conclusion: Summarize your result. Did this event impact the company in other ways than just return? Why do you think this happened? Do you expect it to happen again? How could you have capitalize on this event if you knew about it beforehand?

    • 2 years ago
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