A Comparative Analysis of the Market Model and the Multiple‐Factor Market Model

Abstract

This study uses the framework of Patell (1979) to determine whether a multiple‐factor market model or a traditional market model is more effective for information content studies of multinational firms. The multiple‐factor market model is found to be superior to the traditional market model. Researchers wishing to test for information content for events with long event windows should consider using multiple factor models rather than the traditional market model, as it will increase the power of the test.