Considering from the background information on our case, we set our null hypothesis as that the participation in Capital Purchase Program (CPP) does not affect the stock prices or its return. Our alternative hypothesis is that the entering CPP does affect the stock prices or its return. For our event study, we picked the 50 banks from the companies that entered CPP and, we considered the date each bank entered the program as Event Date. For “Estimation Window”, we used 1 year period before the event date. Also, we used 3 day event window, which are the day of the event (0), the day before (-1), and the day after (1). When running the regression, we set return as x variable, and Value Weighted Return as Y variables. We computed the average cumulative abnormal return (CAR) of 50 banks for each three event windows. Based on that, we computed total average CAR of 50 banks for each three event windows and, calculated t-statistics. Also, to support our t-statistics, we calculated p-value.
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