A New Approach in Event Studies: Time Varied Analysis

Abstract

This study proposes a modified market model of event study that takes into account the asynchronous behavior between individual stocks and the stock market by using an added Chebyshev polynomial term. The proposed model takes into account both the macro market performance and the micro individual stock behavior and is empirically tested. The empirical analysis results demonstrate that the proposed model improves the explanatory power of the model as well as the heteroskedasticity. More importantly, its performance is almost independent of the choice of the events and stocks.