In an Event Study, What Two Steps Does a Researcher

question 1

Multiple Choice

In an event study, what two steps does a researcher take to adjust for the valuation effects of other new (and simultaneously-revealed) value-relevant information, in order to isolate the valuation effect of a specific event?

• A)(i) using the market model to remove the effects of other firm-specific factors; and (ii) averaging abnormal returns across many firms with a similar event to wash out the effect of the market.
• B)(i) using the market model to remove the effect of the market; and (ii) averaging abnormal returns across many firms with a similar event to wash out the effects of other firm-specific factors.
• C)(i) averaging returns on 'event' stocks over several days to 'smooth' the information impact; and (ii) washing out the effect of the market by including only days when the market return was small.
• D)(i) averaging returns on 'event' stocks over several days by including only days when the market return was small; and (ii) washing out the effect of the market to 'smooth' the information impact.

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Definitions:

Retina

At the eye's back, there's a sheet of light-sensitive cells that start nerve responses, traveling through the optic nerve to the brain, where they result in the formation of a visual picture.

Retina

The light-sensitive layer of tissue at the back of the inner eye, responsible for converting light into neural signals for visual recognition.

Lens

A transparent structure in the eye that focuses light onto the retina to produce clear images.

Elongated Eye

A condition often associated with myopia, where the eyeball is longer than normal, causing light to focus in front of the retina.