Conducting event studies with Asia-Pacific security market data

Abstract

We investigate the effectiveness of several well-known parametric and non-parametric event study test statistics with security price data from the major Asia-Pacific security markets. Extensive Monte Carlo simulation experiments with actual daily security returns data reveal that the parametric test statistics are prone to misspecification with Asia-Pacific returns data. Two non-parametric tests, a rank test [Corrado and Zivney (Corrado, C.J., Zivney, T.L., 1992, The specification and power of the sign test in event study hypothesis tests using daily stock returns, Journal of Financial and Quantitative Analysis 27(3), 465-478)] and a sign test [Cowan (Cowan, A.R., 1992, Non-parametric event study tests, Review of Quantitative Finance and Accounting 1(4), 343–358)] were the best performers overall with market model excess returns computed using an equal weight index.