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st: Event study abnormal returns in percentage


From   Jelmer Eibergen <jelmer.eibergen@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Event study abnormal returns in percentage
Date   Thu, 28 Jun 2012 13:48:04 +0200

Jelmer Eibergen,

I am currently doing an event study to study the effect of takeover
announcements on stock prices. I have been following the manual provided on:

http://dss.princeton.edu/online_help/stats_packages/stata/eventstudy.html

However, using this manual the ARs are displayed as dollar or euro values.
I need the ARs to be in percentage form. Is this possible by just changing
the command to generate abnormal returns from " gen
abnormal_return=ret-predicted_
return if event_window==1" to "gen
abnormal_return=(ret-predicted_return)/predicted_return if event_window==1"
or will this create some form of error?

Furthermore if it is possible to create a variable that denotes abnormal
returns in percentages can I than still use the command to generate
cumulative abnormal returns? "by id: egen cumulative_abnormal_return =
sum(abnormal_return)" or will could this give erroneous results?

It would be very useful to me if someone could help me with this.

Thanks in advance,

Kind regards Jelmer Eibergen
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