Long Run Stock Returns after Corporate Events Revisited

Critical Finance Review, Forthcoming.

20 Pages Posted: 21 Dec 2017

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

Arizona State University; W.P. Carey School of Business

Feng Zhang

University of Utah - Department of Finance

Date Written: May 22, 2017


Kolari, Pynnonen, and Tuncez rely on simulation outcomes to criticize the normalization of firm characteristics employed by Bessembinder and Zhang (2013) to assess returns after major corporate events. However, their simulation outcomes simply verify that a non‐linear normalization is inappropriate if the true relation is linear. The relation between log returns and firm characteristics is unknown, but is unlikely to be linear, as the distribution of firm characteristics is strongly skewed. Here, we report on bootstrap simulations that show our methods provide unbiased estimates with appropriate statistical size and high power to detect abnormal returns when implemented in actual data. Kolari, Pynnonen, and Tuncez also provide empirical estimates that comprise useful sensitivity tests. Their results verify that firm characteristics are useful in assessing whether returns to event firms are abnormal, largely confirm our conclusions with regard to SEOs, M&As, and dividend increases, but show that conclusions regarding IPOs depend on implementation choices.

Suggested Citation

Bessembinder, Hendrik (Hank) and Zhang, Feng, Long Run Stock Returns after Corporate Events Revisited (May 22, 2017). Critical Finance Review, Forthcoming. , Available at SSRN: https://ssrn.com/abstract=3090037

Hendrik (Hank) Bessembinder

Arizona State University ( email )

PO Box 873906
Tempe, AZ 85207
United States

W.P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://https://wpcarey.asu.edu/people/profile/2717225

Feng Zhang (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112-9303
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics