On the Statistical Significance of Event Effects on Unsystematic Volatility

41 Pages Posted: 25 Feb 2000

See all articles by Jimmy E. Hilliard

Jimmy E. Hilliard

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Robert Savickas

George Washington University - School of Business - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 16, 2000

Abstract

The methodology for determining the statistical significance of the impact of a certain event (stock split, corporate restructuring, change in regulation, etc.) on the unsystematic volatility of asset returns is developed. The measures of such an impact and corresponding test statistics are derived. Simulations show that the suggested tests reject the true null hypothesis of no impact on volatility at appropriate levels, while the rejection rates of a false null hypothesis increase with the magnitude of the effect. An application of the methodology to corporate spin--offs reveals statistically significant and long--lasting increases in the unsystematic volatility of parent companies' returns.

JEL Classification: G14, G34, C10

Suggested Citation

Hilliard, Jimmy E. and Savickas, Robert, On the Statistical Significance of Event Effects on Unsystematic Volatility (February 16, 2000). Available at SSRN: https://ssrn.com/abstract=211908 or http://dx.doi.org/10.2139/ssrn.211908

Jimmy E. Hilliard

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

Department of Finance
Baton Rouge, LA 70803-6308
United States
225-578-7676 (Phone)
225-578-6366 (Fax)

Robert Savickas (Contact Author)

George Washington University - School of Business - Department of Finance ( email )

Funger Hall, Suite 501R
2201 G Street, N.W.
Washington, DC 20052
United States
202-994-8936 (Phone)
202-994-5014 (Fax)

HOME PAGE: http://savickas.net/

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