Abstract
This paper proposes a new methodology for measuring announcement effect on stock returns. This methodology requires no prior specification of the event day, event, and estimation windows, and therefore is a generalization of the traditional event study methodology. The dummy variable, which indicates whether the event occurred or not, is treated as missing. The unconditional probability of abnormal return is estimated by the EM algorithm. The probability that announcement is effective and the average announcement effect are estimated by the Gibbs sampler. How the method works is demonstrated on simulated data and IBM stock price returns.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
