TITLE:
Eventful Non-Events: Distinguishing an Event from a Non-Event in Event Studies
AUTHORS:
Vivek Kumar, Arpita Srivastava
KEYWORDS:
Event Study Methodology, Tautology, Corporate Political Activity
JOURNAL NAME:
Theoretical Economics Letters,
Vol.7 No.5,
July
1,
2017
ABSTRACT: Not all interesting events can be subjected to event
studies. In this note, we take the example of event studies related corporate
political activity to point out some events which though interesting cannot be
used for event studies. Event studies in corporate political activity
literature study stock market reaction to events such as election results,
political parties suddenly coming into power, and ex-employees of a firm
getting political positions. I assert that inference drawn in such studies is
tautological. I point out an implicit assumption of event studies being
violated in these studies. Event studies in this area not suffering from this
problem are also pointed out.