Event Study in Corporate Finance

[Mori Shah]

Hi all,

I have two questions about how I should run an event study. First, I have a staggered implementation of policy but do not know how I should run an event study. What I am doing is as follows:
1- I created an event variable which is equal to -3, -2, -1, 0 , 1,2,3,..
2- I run the following regression:
reg output ib0.event , r

event is my event variable from the first stage.

my question is whether my approach is correct or not. I would really appreciate it if someone can tell me how I can run an event study with lags and leads.

My second question is what happens if some states after a while cancel that policy. So some states change their status. I would really appreciate it if you can tell me how I should deal with it. Thank you very much for your time.

Best,
Mori

[David Benson]

Hi Mori, welcome to Statalist!

By "Event Study in Corporate Finance" I assume you mean, measure the stock market reaction to some policy being implemented.

1) So if you have access to WRDS, you can use their EVENTUS tool to do the event study for you (and return all the test statistics). There is another external event study calculator here, although I have never used it.

2) To calculate it yourself in Stata, take a look here, here, here, and here.

3) There are also several modules available on SSC for running stock market event studies in Stata, including eventstudy and eventstudy2 (findit eventstudy). There is a 2018 Stata Journal article on using the community-contributed command estudy here.

Hope that helps!

[Chiraz KARAMTI]

Hi everyone
It's my first time using event study however to calculate normal returns I'm using GARCH model. I just don't understand one thing !! using OLS on the estimation window, we use the estimated parameters to predict the normal retunrs for the event window. How do we use the GARCH to predict the normal returns for the event window? is it the classic forecasting process with GARCH ? No paper at all explain well the procedure of forecasting normal returns using GARCH !! any ideas please ???

[Thomas Kaspereit]

Dear all,

For event studies in corporate finance and related disciplines, I would like to point to my recent article "Event studies with daily stock returns in Stata: Which command to use?", available here:

https://www.researchgate.net/publica...command_to_use

Best regards
Thomas