An event study is a statistical method to assess the impact of an event (also referred to as a "treatment").[1]
Early prominent uses of event studies occurred in the field of finance.[1] For example, the announcement of a merger between two business entities can be analyzed to see whether investors believe the merger will create or destroy value. The basic idea is to find the abnormal return attributable to the event being studied by adjusting for the return that stems from the price fluctuation of the market as a whole.[2] The event study was invented by Ball and Brown (1968).[3]
As the event methodology can be used to elicit the effects of any type of event on the direction and magnitude of stock price changes, it is very versatile. Event studies are thus common to various research areas, such as accounting and finance, management, economics, marketing, information technology, law, political science, operations and supply chain management.[4]
One aspect often used to structure the overall body of event studies is the breadth of the studied event types. On the one hand, there is research investigating the stock market responses to economy-wide events (i.e., market shocks, such as regulatory changes, or catastrophic events like war). On the other hand, event studies are used to investigate the stock market responses to corporate events, such as mergers and acquisitions, earnings announcements, debt or equity issues, corporate reorganisations, investment decisions and corporate social responsibility (MacKinlay 1997;[5] McWilliams & Siegel, 1997[6]).
^ abMiller, Douglas L. (2023). "An Introductory Guide to Event Study Models". Journal of Economic Perspectives. 37 (2): 203–230. doi:10.1257/jep.37.2.203. ISSN 0895-3309.
^Ronald J. Gilson and Bernard S. Black, The Law and Finance of Corporate Acquisitions, 2 edition, 1995, 194-195.
^Ray Ball, and Philip Brown, An Empirical Evaluation of Accounting Income Numbers, Journal of Accounting Research, Vol. 6, Autumn 1968.
^Ding, Li; Lam, Hugo K.S.; Cheng, T.C.E.; Zhou, Honggeng (2018-06-01). "A review of short-term event studies in operations and supply chain management". International Journal of Production Economics. 200: 329–342. doi:10.1016/j.ijpe.2018.04.006. ISSN 0925-5273.
^MacKinlay, A. C. “Event Studies in Economics and Finance,” Journal of Economic Literature Vol. XXXV, Issue 1 (March 1997). Available at:https://www.jstor.org/stable/2729691
^McWilliams, A. and Siegel, D. "Event studies in management research: Theoretical and empirical issues" Academy of Management Journal, Vol. 40, No. 3, (1997)
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