Traditional event study methods use regression models to estimate market models and conduct statistical tests. We present a method based on option-implied information about the distribution of stock returns and the co-movement with return factors. This method decreases the reliance on historical market information, uses more contemporaneous inputs, and avoids potential bias from standard regression approaches. We derive this method for one- and two-factor models and provide illustrations of how it compares to the historical and in-sample approaches. We discuss empirical implementation issues and situations where this forward-looking approach might be most appropriate.
From preliminary to final approval: How often do settlements in securities class actions fail?
In this CRA Insights, Rahul Chhabra presents analysis of the Institutional Shareholder Services (ISS) data on cases filed in the past 10 years involving...