Author: Festus Kipyego Bett
Author Email: fekibe@amail.com
Abstract
In recent years, the most frequently used tools in financial research is event study methodology. It was initially established as a statistical tool for empirical research in finance and accounting, but it has since been applied to other disciplines as well, including political science, law, history, economics and marketing. One of the main purposes of event studies in marketing is to evaluate any abnormalities or excess returns that have been received by security holders after engaging in certain events. In doing so, event studies examine how efficient the market is; they are often used to test the efficient market hypothesis which stipulates that the prices of assets give all available information. Despite how simple and standard event studies are, differences in methodology and their relative merits continue to stand out in the literature. This paper reviews methodological approaches in short and long-term event studies in finance. While short-term methods are straighter forward, for long term, any empirical model is still an empirical question. We conclude further empirical research on the latter models is necessary. Additionally, we claim that event studies should also consider fundamental analysis.
Keywords: Event studies, Market Efficiency, Portfolio, Returns, Investment
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Suggested Citation
Kipyego, B.F. (2020). Event studies in finance: A review on the methodological approaches. African Research Journal of Education and Social Sciences, 7(2), 38-46. Available online at http://arjess.org/education-research/event-studies-in-finance-a-review-on-the-methodological-approaches.pdf
