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Unformatted text preview: What is an event study designed to test? In disputes that involve publicly traded companies, a statistical technique known as an event study , which can be used to relate security price movements to specific events, is an important part of the economic experts toolkit. Event studies have been developed in the academic literature over several decades, and have been applied in a wide variety of contexts to measure the price movement of securities in response to new information. For example, academic economists have used event studies to assess the impact on firm value of policy measures such as new regulations or changes in interest-rate policy; to gauge the markets expectation about the benefit or harm to companies from a merger or acquisition; and to measure the impact on share prices of corporate events such as stock splits, the issuance of new shares, or earnings announcements. In an event study, the researcher observes how the price of a security moved during a defined window of time around a given event, and isolates the effect of the event from other factors...
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This note was uploaded on 10/15/2011 for the course FIN 550 taught by Professor Smith during the Spring '11 term at Berklee.
- Spring '11