## Expert Dialog

Question #55: Scope of Service & Data Inputs

I would like to use your server app to conduct an event study and trying to find out if the app can completely replace an analysis with a statistics software like Stata or R? Also, I was wondering if you offer further advice or forums to better understand the preparations of the datasets before one is able to upload the request files? Is it also possible to use own (rather specific) indices as benchmark returns for CAARs and to use non-Yahoo or Google Finance sources but data from commercial data providers like Datastream for the share price data to be analyzed with the app?

EST's server-side research apps replace the use of other statistical software for the defined scopes of each individual research app. For the case of an event study, this means the following: As long as want to perform an event study only and are interested only in ARs, AARs, CARs, CAARs, and the respective test statistics, you are all set. Instead, if you want to explain the abnormal returns using multiple regression analysis, you will need another statistical software package for the regression. EST only provides analytics and no data. Hence, you are free to choose whatever financial data you can organize and put into the apps. Simply make sure the data lives up to the requirements of the respective research app - as described on the introductions to the individual apps.
Question #54: Error

I have tried to test the event study R add-in, but the following error appears again and again:

Listening on http://127.0.0.1:5633
[1] "Validate input files."
[1] "Perform Event Study"
[1] "Check batch process: Step 0"
Warning: Error in UseMethod: no applicable method for 'http_error' applied to an object of class "data.frame"
77: httr::http_error
76: self$getTaskStatus 75: estAPI$performEventStudy
74: observeEventHandler
3: shiny::runApp

I tried to use the sample files, but for any reason it didn't work out. Is there a solution to this error?

Please make sure to use the new version 0.36, which is available at CRAN (https://cran.r-project.org/web/packages/EventStudy/index.html) and on our Github. We had to apply some changes which turned older versions non-functional.
Question #53: Error Message when I ran the API with the packages sample data

Dear Dr. Schimmer,

when I try to use the API, I receive the following error message. This happens even when I use the sample data from the package:

Listening on http://127.0.0.1:5750
[1] "Validate input files."
[1] "Perform Event Study"
[1] "Check batch process: Step 0"
Warning: Error in UseMethod: no applicable method for 'http_error' applied
to an object of class "data.frame"
77: httr::http_error
76: self$getTaskStatus 75: estAPI$performEventStudy
74: observeEventHandler
3: shiny::runApp

Until Wednesday it worked fine. Now not anymore. May you tell me whats the reason for it and how to solve it? I despaire of it!

We have deployed an important architectural change to our API, which unfortunately impacted our R package. As per March 2nd, 2019, the Rpackage has been fixed and works again. Please excuse this hiccup. As a general rule: Whenever you face issues with the R package, please use our web interface (https://www.eventstudytools.com/axc/upload) or our API (https://www.eventstudytools.com/API-ARC).
Question #52: Large scale event study

I am currently conducting a large-scale event study. I am using R and the EventStudy package. It turns out that I am only able to upload around 2000 stock prices otherwise I receive the error code:

Request Status Code: 500
Error: Argument 'txt' must be a JSON string, URL or file

Is there any way to use the package for a large amount of data e.g. 200k stock prices in the overall analysis?

We strongly recommend using the API directly for large-scale studies. This will give you also some additional flexibility in structuring the analysis - if needed.
Question #51: What's your current API key?
Question #50: Event Study about rating changes

Dear Event study tools,

I am studying the rating changes effect on stock price, at the moment I use the market model to calculate the abnormal returns in the event window for each rating change for each company in the sample. I have this data but I don't understand how I can aggregate them into the Average abnormal returns and later into the CAAR, also I am a concerned about how to determine the standard deviation for T- test.

You can use the grouping variable in our abnormal return calculator to get the AARs and CAARs as well as all associated test statistics calculated.
Question #49: t-test fpr CAAR

Dear Dr. Müller,

for the t-test (mentioned on eventstudytools - parametric test statistics number 1) it is possible to test H0:ARi,t=0 and H0:CARi=0.

For my study I am using the paper of MacKinlay (1997). On page 24, formula (20), he used a test of which I thougt that it is a t-test for CAAR. Dymke (2010) used this formula of MacKinlay on page 77 too. But on page 79 he talks about the parametric test of Brown/Warner (1985).

I am confused and need some help.

Daniel

Hi. You are correct formula (20) on page 24 is a CAAR t-test. This is the same test as in point 2 on our test statistic page. Brown and Warner uses this test in their publication (1985), so you may name this test "parametric test of Brown/Warner", but this is not common. More common is Cross-sectional test. Best, Simon
Question #48: Test statistic formula for CARs

Hi,

I am happy to use information you provide on your great website to do my event study.

I was wondering about the formula of the standard deviation of CARs for each firm. S2CAR = L2*S2*ARi.

What is meant by L2?
Is it the number of days of the event period?
Or is it the number of day of the subperiod of my event in case i want to check the significance of t-3 - t+3 for each firm (=7)??

Is L2 multipled by S2*ARi or does it mean that I should use S2*ARi of the event window?

Best Wolfgang

Hi, L2 is the number of non-missing days in the event window. This is a little bit confusing as we want to consider missing values. Next question ("Is L2 multipled by S2*ARi or does it mean that I should use S2*ARi of the event window?") is unclear to me. Which formula? Please be more precise. But L2AR_i means L2 * AR_i. Best, Simon
Question #47: Z -statistic in Corrado Test

Dear Mr. Mϋller
I’m conducting event study in Indonesian market for my bachelor thesis. Following Sudeck & Iatridis (2014), I will use Patell test and Corrado test to test my hypothesis. I want to ask you several questions:

1. Is it okay not to conduct normality test of my data? I mean, I understand that Patell test is used in case the data are normal, while Corrado test is used when my data are not normally distributed. But I confused, should I just do both test without doing normality test?

2. When I look at Campbell & Minguez-Vera (2010), we will find Z-statistic at the end of Corrado test calculation. Do test its significance, can I use Z-table for comparison? Or should I compare Z-statistic of Corrado test with another statistic table?

Hello, 1. You do not need to do a normality test for the Corrado rank test, as there is no such assumption. N should be large enough for valid results. I would advice you to perform both test and have a closer look at the data when the results differs. 2. You can use this a z-table for p-values. Best, Simon
Question #46: Event Study

Sehr geehrter Herr Müller,

mein Name ist Sandip Deol und ich stúdiere Internatrional Finance. Zurzeit habe ich ein Projekt am laufen. In diesem Projekt geht es um Auswertungen von Artikeln die sich auf die Weltwirtschaftskrisen beziehen. Wir bewerten die Artikeln nach einer Skalar. Das Problem vor dem ich stehe ist, dass ich nicht weiß, wie ich meine ausgewerteten Artikeln mit in meine Event Study mit hineinbeziehen kann. Da ich die Dax Kurse mit betrachte, arbeite ich eher mit den Kursen als wie mit meiner Auswertung. Meine Hypothese lautet, ob Artikel Veröffentlichungen eine Weltwirtschaftskrise hervorsehen kann. Könnten Sie mit diesbezüglich helfen ? Könnte ich Sie telefonisch erreichen?

ich wäre Ihnen sehr dankbar dafür.

Mit freundlichen Grüßen

Sandip Deol