Event Studies

Question 1

Steps in Expected and Abnormal Returns with Formulas

Answer 1

Expected: alpha + beta x Mkt R
Abnormal: stock R - E(r)

Question 2

Steps in Market Models with Formulas

Answer 2

N: =COUNT
alpha: =INTERCEPT
beta: =SLOPE
s (residuals): =STEYX
R Squared: =RSQ
SE Beta: s/SQRT(N x VAR.P(Mkt R))

Question 3

First t stat

Answer 3

AAR/SQRT(0.25 x (s^2+s^2))

Question 4

Second t stat

Answer 4

CAAR/(SQRT(COUNT(CAAR:CAAR)) x SE(AAR))

Question 5

SE (AAR) Formula

Answer 5

=SQRT(0.25 x (s^2+s^2))

Question 6

What does the t stat represent

Answer 6

It tests whether the abnormal return (AR) or cumulative abnormal return (CAR) is statistically different from zero. (Statistically significant)