Event-Induced Volatility and Tests for Abnormal Performance

Posted: 1 Aug 2002

See all articles by Robert Savickas

Robert Savickas

George Washington University - School of Business - Department of Finance

Abstract

I analyze a simple test statistic for mean abnormal returns in the presence of stochastic volatility during both event and nonevent windows and in the presence of event-induced variance increases. Unlike previous tests, the parametric test evaluated here does not require that the volatility effect of the event be the same across all securities. Simulations show that the test exhibits nontrivial gains in power over previously developed parametric and nonparametric tests, and the true null hypothesis is rejected at appropriate levels.

JEL Classification: G14, C10

Suggested Citation

Savickas, Robert, Event-Induced Volatility and Tests for Abnormal Performance. Available at SSRN: https://ssrn.com/abstract=312441

Robert Savickas (Contact Author)

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

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