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fm3_chapter14

# fm3_chapter14 - THE EVENT STUDY TIME LINE T0 T1 T1 1 0...

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THE EVENT STUDY TIME 0 T 0 T 1 T 1 + 1 Start date for estimation window End date for estimation window Start date for event window Event date ESTIMATION WINDOW The estimation window is used to determine the normal behavior of the stock wrt market factors. Most often we use the regression R it = α + β R mt to determine this "normal" behavior. EVENT WINDOW We use data from this window, in conjun with the α and β of the stock or stocks to determine whether: i) The event announcement was anticipa leaked. ii) The "post-announcement effect": How took for the event information to be abso by the market.

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E LINE T 2 T 2 + 1 T 3 End date for event window Start date for post-event window End date for post-event window nction o ated or w long it orbed POST-EVENT WINDOW Used to investigate longer-term company performance following the event.
DRAFT: 01/25/2011 Privileged and Confidential: Attorney Work Product 6/30/2004 8/23/2004 10/17/2004 12/11/2004 2/4/2005 3/31/2005 5/25/2005 7/19/2005 9/12/2005 11/6/2005 12/31/2005 \$30 \$35 \$40 \$45 \$50 \$55 \$60

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Intercept 0.0007 #MACRO? Slope 0.6364 #MACRO? R-squared 0.1315 #MACRO? Steyx 0.0113 #MACRO? 252 #MACRO? EVENT WINDO Date NYSE Gillette 27-Jan-04 -0.48% -0.42% 28-Jan-04 -1.26% -1.27% 29-Jan-04 0.00% -0.94% 30-Jan-04 -0.06% -1.39% #MA 2-Feb-04 0.26% -0.74% 19-Jan-05 -0.78% -0.09% 20-Jan-05 -0.69% -0.56% 21-Jan-05 -0.20% -1.50% 24-Jan-05 -0.18% 0.57% 25-Jan-05 0.21% 1.44% 26-Jan-05 0.68% 0.07% 0.50% -0.44% 27-Jan-05 0.04% 1.89% 0.09% 1.80% 28-Jan-05 -0.24% 12.94% -0.09% 13.03% 31-Jan-05 0.82% -1.71% 0.59% -2.30% 1-Feb-05 0.80% -0.83% 0.57% -1.40% 2-Feb-05 0.32% 0.80% 0.27% 0.52% 3-Feb-05 -0.29% -0.59% 4-Feb-05 0.97% -1.29% 7-Feb-05 -0.23% -0.38% 8-Feb-05 0.09% -0.75% 9-Feb-05 -0.63% -1.20% 10-Feb-05 0.68% 0.37% 11-Feb-05 0.71% 1.58% 14-Feb-05 0.26% 0.67% 15-Feb-05 0.32% 1.68% 16-Feb-05 0.04% -0.41% 17-Feb-05 -0.47% 0.18% 18-Feb-05 0.21% 0.10% 22-Feb-05 -1.05% -1.82% 23-Feb-05 0.45% 2.05% 24-Feb-05 0.55% 0.81% 25-Feb-05 1.08% 0.57% 28-Feb-05 -0.55% -2.33% GILLETTE RETURNS: ESTIMATION WIND AND EVENT WINDOW Days in estimation window Expected return Abnormal return (AR) 2% 4% 6% 8% 10% 12% 14% 16% Expected return Abnormal return (AR) Cumulative abnormal return (CAR) A B C D E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285
1-Mar-05 x-axis for chart 26jan05 27jan05 28jan05 31jan05 1feb05 2feb05 26jan05 27jan05 28jan05 31jan05 -4% -2% 0% A B C D E 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305

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W ACRO? #MACRO? -0.44% #MACRO? 1.36% #MACRO? 14.39% #MACRO? 12.09% 10.69% 11.21% DOW Cumulative abnormal return (CAR) F G H 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285
1feb05 2feb05 F G H 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305

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Intercept 0.0007 #MACRO? Slope 0.6364 #MACRO? R-squared 0.1315 #MACRO? Steyx 0.0113 #MACRO? 252 #MACRO? EVENT WINDOW Date NYSE Gillette 27-Jan-04 -0.48% -0.42% 28-Jan-04 -1.26% -1.27% 29-Jan-04 0.00% -0.94% 30-Jan-04 -0.06% -1.39% #MAC 2-Feb-04 0.26% -0.74% 19-Jan-05 -0.78% -0.09% 20-Jan-05 -0.69% -0.56% 21-Jan-05 -0.20% -1.50% 24-Jan-05 -0.18% 0.57% 25-Jan-05 0.21% 1.44% 26-Jan-05 0.68% 0.07% -0.44% -0.39 27-Jan-05 0.04% 1.89% 1.80% 1.59 28-Jan-05 -0.24% 12.94% 13.03% 11.56 31-Jan-05 0.82% -1.71% -2.30% -2.04 1-Feb-05 0.80% -0.83% -1.40% -1.24 2-Feb-05 0.32% 0.80% 0.52% 0.46 3-Feb-05 -0.29% -0.59% 4-Feb-05 0.97% -1.29% 7-Feb-05 -0.23% -0.38% 8-Feb-05 0.09% -0.75% 9-Feb-05 -0.63% -1.20% 10-Feb-05 0.68% 0.37% 11-Feb-05 0.71% 1.58% 14-Feb-05 0.26% 0.67% 15-Feb-05 0.32% 1.68% 16-Feb-05 0.04% -0.41% 17-Feb-05 -0.47% 0.18% 18-Feb-05 0.21% 0.10% 22-Feb-05 -1.05% -1.82% 23-Feb-05 0.45% 2.05% 24-Feb-05 0.55% 0.81% GILLETTE RETURNS: THE SIGNIFICANCE OF THE ABNORMAL RETURNS Days in estimation window Abnormal return (AR) AR t-test A B C D E 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283
25-Feb-05 1.08% 0.57% 28-Feb-05 -0.55% -2.33% 1-Mar-05 0.41% 1.19% x-axis for chart 26jan05 27jan05 28jan05 31jan05 1feb05 2feb05 A B C D E 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305

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W CRO?
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fm3_chapter14 - THE EVENT STUDY TIME LINE T0 T1 T1 1 0...

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