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Question #25: Generating AAR CAAR AND T-TEST

Can I conduct a complete event study using your app?

Answer by Dr. Markus Schimmer:
Yes, the research apps on this website will give you ARs, AARs, CARs, CAARs, and all test statistics at the respective levels of analysis - probably one of the most complete sets of statistics any solution will provide to you.
Question #24: Multiple Events which all affect the same Companies in one Study

Hello,

I'm doing my Thesis right now and I have to test if certain events at single firms do have an effect on a group of other firms all in the same market. How would you recommend me doing this? All Events seperate? I got about 200 single Events and 50 firms spread globally

Answer by Dr. Markus Schimmer:
You have to fully enumerate the events per each company. Your request file will thus hold a larger number of lines. You can use the grouping variable to create meaningful subsets from this overall universe of events.
Question #23: can not calculate event window before event day

I can not calculate event window before event day like -7, -1. System force me to write the last day of event window bigger than 0.

Answer by Dr. Markus Schimmer:
Yes, for technical reasons, we need to enforce that the event date needs to be in your event window. You can conceptually circumvent this requirement by changing the calendar date of your event accordingly.
Question #22: length of event window

I am working on a study of biopharma stock prices's responses to receiving "breakthrough therapy designation" (BTD) from the FDA. Our hypothesis is that pre-commercial biotechs will experience a transient stock bump, but excess returns will dissipate by ~90 days. My question relates to the appropriate / maximum length of the event window. What's the maximum or optimal length of the event window, and what factors might dictate the appropriateness of a longer vs. shorter one? We have seen papers with 5-30 day windows, but have not seen a good discussion of how to select the length.

Answer by Dr. Markus Schimmer:
The appropriate length of the event window is driven by your research assumptions on how the capital market is processing the information that is released by the event studied. From what you wrote I assume you have the following assumptions: (1) Prior to the BTD release, there is no information leakage (2) You are studying companies in the US, which means that we should assume semi-strong market efficiency (3) You have the hypothesis that during the 90 days subsequent to the BTD release, abnormal returns are negative and undo the positive effect surrounding the BTD release This will give you the following type of parameters to your event study: + Short event window around the BTD date to capture the positive effect: [0,2] if you are certain that there is no information leakage or [-2,2] if you assume some leakage. You choose the second number based on how opaque the news might be to the capital markets. BTD releases sound quite clear, so you wouldn't assume the US capital market to take more than 2 days to price it in. Note: the smaller your companies, the less coverage they have, the long it may take... + Then, for your 90 day hypothesis you obviously will take a 90 day event window. Most likely, you would ground the calculation on the same estimation window as your [-2,2] window, meaning on the period prior to the BTD event - this will ensure twofold: one, your second analysis uses the same presumed relationship of your firms to the stock markets, and two, you overrule the effect of the BTD event on the stock market-company relationship, which you factually negate given your hypothesis (meaning, this choice is in line with your hypothesis)
Question #21: VOLUME EVENT STUDY

I would like to use EventStudyTools for volume eventstudy.

The market data required "mean of log percentage of trading volume of index".

Could you advise me how to derived the value from raw data "volume of index".

thank you

Answer by Dr. Simon Müller:
There is no easy way to get the volume of an index. You have to get the volumes of all companies from that index and then merge it into one variable.
Question #20: Should I use Market Model( OLS ) or Market Model ( Garch)?

Dear Professor,

I conduct ARCH effect tests on the firms in my samples, and find that around half of the firms has significant ARCH effect, while the other half has no ARCH effect.

I wonder which model I should use. The Market Model or the GARCH Model?

Best wishes,
Chelsea

Answer by Dr. Simon Müller:
Hi. I would generally advice to use the GARCH model, as this model can handle volatility changes.
Question #19: Multiple Event Windows

How to prepare the request sheet when looking at more than 1 event window? The sample request sheet is only calculating 1 event window.

Eric Romero

Answer by Dr. Markus Schimmer:
You treat this second event window as an individual observation - meaning, you add another line to the request sheet and calculate the other event window. 
Question #18: Alfa Beta in aARC

In have one question what are alfa and beta in Analysis Report. I know what they mean if I use Market Model

Equation:
http://image.slidesharecdn.com/l2flashcardsportfoliomanagement-ss18-1312...

BUT

I don't know what Alfa and Beta are in FamaFrench 3 Factor Model

Equation
http://3.bp.blogspot.com/-dqWugq0Wotw/Ut8PnxHP-6I/AAAAAAAAAAA/d6_cqU81vt...

Could you help me and explain this?

John

Answer by Dr. Simon Müller:
Hi. You may write the model as: R_it = alpha + beta * R_im + s_i * SMB_t + h_i + epsilon_it. Then it should be clear what alpha and beta is. Simon
Question #17: AR CAR signifiance tests

Hi, I'am Eray. I'am phd student.

My thesis field is price manipulation. Manipulation period is more than one day. So, event date is (5, 20. 45, 100, 250 etc). For example, a company's manipulation period is start 03.08.2000 and end 14.12.2000. (03.08.2000-14.12.2000) As seen 95 day manipulation period.

I want to calculate each company for pre-manipulation, manipulation and post-manipulation period cumulative abnormal return. My estimation period, before 03.08.2000 100 trading day.

Estimation period pre-man manip period post-manip
----------------------------///-------------------///--------------------////----------------------
100 trading day -30 day 95 day + 30 gün

What can I do? I want to buy ESM. Can I calculate?

Answer by Dr. Simon Müller:
ESM? You can do this with our tool for free (just one citation in you thesis). Please contact me per email (info@muon-stat.com).
Question #16: EVENT STUDY

Hi, I have a question about using free event study which is available on the website. the problem is that when I use a credit rating base index as the market price and I have 5 broad categories for the market price in each day.My problem is that I don't know how to list the five market price for each date in the Market data file and how to clarify it clarify my firm dataset and request file? I cannot understand what is the variable group in request dataset.
I already have the file for abnormal return and I just want to use this file to calculate t statistic, is there any simple way for that?
could you please help me to solve this issue?

Answer by Dr. Simon Müller:
Both request data files are in the long format as described on http://www.eventstudytools.com/instructions-axc. So firms are identified by the first column, dates by the second, and on the third you put the closing price. For the market data you have in the first column the market index indentifier, on the second the date and on the third the closing price. You can calculate test statistics with our free web tool.

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