Robust Inference in Single Firm / Single Event Analyses

Elsas, Ralf and Schoch, Daniela (2019): Robust Inference in Single Firm / Single Event Analyses. SSRN

Abstract

Single firm / single event (SFSE) studies are relevant in corporate finance. Since inference on abnormal returns in this context necessarily relies on the time series variance of these abnormal returns, the implied problem of heteroscedasticity is obvious, although hard to solve. We analyze robust inference in an SFSE setting using Monte Carlo and resampling experiments. Estimation is biased when the calibration and event period occur in different volatility regimes. We develop a unique specification test for these structural breaks. The most robust inference is obtained by using intraday data and a multiplicative component GARCH estimator.

• Item Type: Paper
• Keywords: Event studies, Inference, Monte Carlo simulation, Volatility, Structural breaks
• Faculties: Munich School of Management > Institute for Finance and Banking
• Subjects: 300 Social sciences > 330 Economics
• Language: English