On the Statistical Significance of Event Effects on Unsystematic Volatility

Posted: 8 Jun 2001

See all articles by Robert Savickas

Robert Savickas

George Washington University - School of Business - Department of Finance

Jimmy E. Hilliard

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

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Abstract

We develop a method for determining the significance of the effect of a certain event (stock split, corporate restructuring, change in regulation, etc.) on unsystematic volatility of asset returns. Simulations show that the suggested tests reject the true null hypothesis of no effect on volatility at appropriate levels, whereas the rejection rates of a false null hypothesis increase with the magnitude of the effect. An application of the method to corporate spin - offs reveals statistically significant and long - lasting estimated increases in unsystematic volatility of parent companies' returns.

JEL Classification: G14, G34, C10

Suggested Citation

Savickas, Robert and Hilliard, Jimmy E., On the Statistical Significance of Event Effects on Unsystematic Volatility. Available at SSRN: https://ssrn.com/abstract=271285

Robert Savickas (Contact Author)

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

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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)

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