The Influence of Market Conditions on Event-Study Residuals

Klein, April; Rosenfeld, James
September 1987
Journal of Financial & Quantitative Analysis;Sep87, Vol. 22 Issue 3, p345
Academic Journal
This paper presents evidence that the mean-adjusted returns and raw-market returns models are misspecified when the event under investigation occurs during either bull or bear markets. To demonstrate this phenomenon, simulation techniques as well as an actual event are employed to examine the reliability of four different return-generating models. When the event occurs during a bull (bear) market, both the mean-adjusted and raw-market returns models produce upwardly (downwardly) biased positive (negative) abnormal returns. This results in statistically significant cumulative abnormal returns over selected preevent and postevent intervals. In contrast, both the market-adjusted and single-index models show far less evidence of any unusual price activity over these same intervals.


Related Articles

  • Defining and Dating Bull and Bear Markets: Two Centuries of Evidence. Gonzalez, Liliana; Hoang, Philip; Powell, John G.; Jing Shi // Multinational Finance Journal;Mar-Jun2006, Vol. 10 Issue 1/2, p81 

    Despite widespread media interest in bull and bear markets, academic research that seeks to formally define bull markets is almost non-existent. This paper defines bull and bear markets in relation to a simple model of mean return regimes, and implements the definition using two formal turning...

  • STOCK PRICE MOVEMENT ASSOCIATED WITH TEMPORARY TRADING SUSPENSIONS: BEAR MARKET VERSUS BULL MARKET. Hopewell, Michael H.; Schwartz Jr., Arthur L. // Journal of Financial & Quantitative Analysis;Nov76, Vol. 11 Issue 4, p577 

    In a recent paper we provide a detailed description of the institutional aspects of NYSE-administered temporary trading suspensions and a discussion of the potential costs and benefits of such suspensions. In addition, we analyze security price behavior surrounding the approximately 1,000...

  • CONSTRUÇÃO DE UMA CARTEIRA DE AÇÕES POR MEIO DE COINTEGRAÇÃO COM A CARTEIRA DE REFERÊNCIA: EVIDÊNCIA A PARTIR DE AÇÕES NA BOLSA DE VALORES DE SÃO PAULO. Ricomini Almeida, Patrícia Marília; Leiva Martin, Diogenes Manoel; Kimura, Herbert; Nakamura, Wilson Toshiro // Revista de Economia Mackenzie;2008, Vol. 6 Issue 6, p41 

    This paper examines the performance of a general dynamic equity indexing strategy based on cointegration, from a market efficiency perspective, observing the different levels of risk and regimes. This new portfolio will be compared with Markowitz portfolio model. The identification of these...

  • A Test for Long-Term Cyclical Clustering of Stock Market Regimes. Powell, John; Roa, Rubén; Jing Shi; Xayavong, Viliphonh // Australian Journal of Management (University of New South Wales);Dec2007, Vol. 32 Issue 2, p205 

    This paper finds that observed monthly United States stock index returns are consistent with an underlying mechanism of shifts in regimes amongst multiple states with differing means and volatility. An issue of especial interest is whether long-term clustering of regimes gives rise to stock...

  • ANOTHER NEW ERA. Fisher, Ken // Forbes Asia;12/10/2007, Vol. 3 Issue 21, p155 

    The author presents an outlook for the global stock market in 2008. He believes that there will be more room for more of a bull market ahead. He wants to be the first to say that 2008 will definitely be a New Era of above-average returns. Thus, he will keep buying stocks until he hears multiple...

  • The bull and bear explained - and how to plan for both varieties of markets. Conte, Anthony M. // Central Penn Business Journal;4/19/2013, Vol. 29 Issue 17, p19 

    The article offers information on the bullish and bearish phenomenon of the stock markets.

  • Stock market not ready for bear quite yet. Hauke, Keenan // Indianapolis Business Journal;8/30/2010, Vol. 31 Issue 26, p26A 

    The article discusses the trends in the stock market wherein the bear market and bull market are being compared.

  • Tug of war continues for Bulls and Bears.  // Hudson Valley Business Journal;8/2/2010, Vol. 21 Issue 31, p8 

    In this article the author discusses aspects of the continued struggle between the Bull and Bear markets which shows stronger earnings and lukewarm economic indicators on companies in the U.S.

  • ASK TIP SHEET. Monson, Kyle // Newsweek;3/22/2004, Vol. 143 Issue 12, p67 

    Poses a question and presents an answer about where the terms bull and bear market originated.


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics