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: Event Studies and Abnormal Returns - Literature review Example

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: Event Studies and Abnormal Returns

This is how stock exchanges role and so as the financial advisors of big multinationals, who see events to be clusters of time or moments. This study will give an analytical review on the relationship of event studies and abnormal returns, projected in the past empirical studies of different companies. How event studies are carried out to generate abnormal returns and what is the role of abnormal returns in creating firms value, will also be elaborated in this study (Getz, 2012). Event An event is a reflection of time or moment projecting a situation where stocks raise or drop, and investors invest or back off (Kritzman, 2003). From marketing or finance perspective, an event is certainly a moment where traders meet traders in order to create a glimpse on the entire stock section. This is to bring investors close to the sellers, in order to generate demand of shares of a particular company. Events could be a merger between two companies to allocate the demand on the stocks list. Events are respective dates or moments in which announcements of mergers are to be made. These are settled to give hype to investors and share holders of the company, which in an overall way raise the demand constraint for the company’s products and services (Kritzman, 2003). ...
This is how an event study figures out that how much close the company is to raise its demand on its share holders and what is the right time to publicize such an event. An event study determines the overall effect of an event with respect to its constraints and dimensions (Kritzman, 2003). Once the impact is determined, the strategists are able to adjust changes on its constraints to see how effectively such an event can be applied. For example an event study of an announced merger would be to see the impact of the merger on the two firms’ values collectively. The study will elaborate that whether the merger is beneficial for both firms or not, which is assessed with respect to market requirements and past financial statistics (Kritzman, 2003). According to Mitchell and Netter (1994), an event study is a statistical assessment technique which finds out the influence of mergers, changing interest rates, dividend announcements on the company’s shares on the stock exchange (Bhagat & Romano, 2001). There are two types of information which firms reveal in the form of events, one is the information which relates to firm’s under questioning (announcement of dividends) and second is information which influence the market shares of the company like changing interest rates (Bhagat & Romano, 2001). Abnormal Returns Abnormal returns are returns on investment, which are beyond or less than the expected returns. Abnormal returns can be negative or positive depending on how much actual return are obtained. Abnormal return is the difference between actual returns and expected returns respectively, giving a negative or positive value of a return. From traders’ point of view, ...Show more

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Literature Review: Event Studies and Abnormal Returns [Instructor Name] Literature Review Introduction There have been many problems associated with traders on stocks at the time of real investment or business. Event studies are thought to be influential for abnormal returns…
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Literature Review: Event Studies and Abnormal Returns essay example
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