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From |
Kit Baum <baum@bc.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Re: Suggestions On Event Study Implementation Using Sureg |

Date |
Fri, 7 Nov 2008 08:10:52 -0500 |

<>

webuse grunfeld,clear reshape wide invest mvalue kstock, i(year) j(company) g onedum = (year>1953) forv i=1/10 { local eqn "`eqn' (invest`i' mvalue`i' kstock`i' onedum)" } sureg `eqn', noh

Kit Baum, Boston College Economics and DIW Berlin http://ideas.repec.org/e/pba1.html An Introduction to Modern Econometrics Using Stata: http://www.stata-press.com/books/imeus.html On Nov 7, 2008, at 02:33 , Tom wrote:

Sorry I missed your reply until now. Actually, the code below places a 1 in days 1381 and 1382 and even if I extend the event period to twenty days it still drops the dummy variable in the results. I found a couple papers that recommended this methodology (seemingly unrelated regression and a dummy for the event days) for regulatory type events. Further, for similar firms (all of my firms are financial) with identical event windows this method (using -sureg-) allows one to reflect the time series and cross-sectional relationship of the errors in the model but still provide differing loadings on the independent variables. The "standard" method leaves me with either measuring the standard deviation of the abnormal returns for the event period across very few observations if I do it firm by firm or else having to combine all abnormal returns of the firms in the measurement of an event abnormal return standard deviation. It is also unclear how to adjust the errors unless I use something like -pcse-. Most of the papers utilizing the standard event study approach I reviewed were able to rely on some kind of randomness in the individual events (such as earnings or dividend announcements) across firms as opposed to one event for all firms as well as diversity in the firm type. 1. Is there any reason you would expect the dummy to be dropped for a longer event window from a -sureg- design viewpoint as opposed to a statistical measurement viewpoint? 2. I don't understand your comment that -sureg- prevents me from examining any number of firms 3. Do you have any suggestions or are you familiar with any standard event study approaches that have similar characteristics to my problem (short event window, same window for multiple firms, all firms of very similar error structure - heteroskedastic, strong cross sectional and time series correlation, etc.) 4. Would you simply use firm specific abnormal return standard deviations or combine into one abnormal return standard deviation across all firms?

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