Calculating abnormal returns in event studies: controlling for non‐synchronous trading and volatility clustering in thinly traded markets

Abstract

Reviews previous research based on event study methodology, pointing out that events can influence returns in many ways, and applies the method to a sample of mergers and acquisitions in the thinly traded Norwegian market 1983‐1994. Explains how the classic market model can be adjusted to control for non‐synchronous trading and changing/asymmetric volatility; and how the event and non‐event periods can be combined into a single model. Applies two different models to the data, compares the results and finds the ARMA‐GARCH approach superior to the OLS. Discusses the implications of this for researchers.

Citation

Bjarte Solibakke, P. (2002), "Calculating abnormal returns in event studies: controlling for non‐synchronous trading and volatility clustering in thinly traded markets", Managerial Finance, Vol. 28 No. 8, pp. 66-86. https://doi.org/10.1108/03074350210768013