Measuring the Impact of Recurring Events on Financial Assets

Abstract

I documented the impact of recurring events on financial assets using a new event study methodology. The new methodology follows the overall structure of a typical event study, but it also objectively identifies a unique duration of each event to be used for cumulative average abnormal return. Moreover, 2 simple criteria are proposed to objectively detect the direction of price movement. To conduct an event study with the new methodology, I developed an algorithm that has 2 user-defined variables according to the needs of the user. The algorithm measures the impact before, during, and after an event, and conducts significance tests at 90%, 95%, and 99% level. Market indices, stocks, and ETFs were evaluated from 2009 to 2019. The algorithm performed better for unexpected events than it did for expected events. I exposed shortcomings of the methodology and the algorithm, and provided directions for further research.