event study AAR and ACAR

[Svetlana Polyakova]

Hello dear members of Statalist,

I want calculate average abnormal return and average cumulative abnormal return. I calculated AR and CAR. In one paper is written:"Calculate the average abnormal return (“AAR”) for each day in the event window. This aggregates the abnormal returns for all N stocks to find the average abnormal return at each time t.". In the another paper is AAR calculated as sum of AR divided by N companies. I am not sure how I can its calculate in Stata. I post one small cutout from my data outcomes. I think for the each date in the event_window I must calculate the mean of abnormal_return. In total, N of companies=77, N of observations=4477. I would be very happy if somebody can help me. Thanks!

[Stephen Jenkins]

Svetlana: Thanks for re-registering with your full name. It's good to show sample output, but please don't paste in screenshots from your Data Browser window. Instead, and as suggested before, do a list of a selection of observations and variables, and paste that output here using CODE delimiters (accessed via the advanced editor A and then the # button -- read more in the FAQ). With the screenshot, there is too much redundant information, and insufficient focus on the things you want us to look at. Moreover it's impossible for readers to cut/paste and "play" with your problem. It would also help if you gave a more precise formula for "AR" and "CAR". Doing these things will raise the chances of readers taking an interest in your problem and being willing to help.

[Attaullah Shah]

I think both the methods lead to the same figures. I assume that the dif variable refers to the difference between your event date and days prior and after the event dates. In that case, you can find average abnormal returns as

egen AAR=mean(abnormal) if event_window==1

. You can also generate average abnormal returns for different windows such as the following code will generate average abnormal returns from event day to t+2

egen AAR2=mean(abnormal) if dif>-1 & dif<3

[Svetlana Polyakova]

thanks for your responses

[Alias Khashba]

Hello Attaullah!
Could u help me to calculate AAR and CAAR ? i try to continue calculate AAR,but i got just one event day ,when my window days go from -25 to 16, i mean i got AAR just for -25 ,for other days i got the same number as -25's day.