Measuring Security Price Performance Using Chilean Daily Stock Returns: The Event Study Method *‪.‬

Siguiendo el enfoque de simulacion de Brown y Warner y usando retornos diarios del mercado accionario chileno, examinamos la especificacion y el poder de tres estadisticos comunmente utilizados en estudios de eventos: el test estandarizado, el de corte transversal y el de portafolio. Nuestros resultados indican que, aunque persisten sintomas de no-normalidad en retornos y excesos de retornos aun a nivel de portafolio, los metodos basados en el uso de tests parametricos y muestras de 10 o mas activos se encuentran bien especificados, al menos para un nivel de significancia del 5%. En terminos del poder, el test estandarizado parece ser siempre mas eficaz en la captura de un retorno anormal que sus competidores. Tambien encontramos, sin embargo, que el poder de las tres pruebas estadisticas analizadas es muy sensible tanto al tamano muestral como al numero de dias que involucre el evento. En particular, hay que ser cuidadosos frente a estudios de eventos con retornos de acciones que comprendan eventos de mas de un dia. Following the Brown-Warner simulation approach and using Chilean daily security returns data, we examine the specification and power of three parametric t-tests commonly used in event studies: the standardized, the cross-sectional and the portfolio t-test. Our findings show that even though symptoms of nonnormality in security returns and security abnormal returns persist even at the portfolio level, methods based on the use of parametric tests for samples of ten of more securities are well specified, at least at a significance level of 5%. In terms of power, our simulation results show the standardized t-test is always more effective in detecting the presence of an abnormal return than its two competitors: the cross-sectional and the portfolio t-test. We also find, however, that the power of the three t-tests is very sensitive to both the sample size and the length of the event period. In particular, conclusions from event studies conducted in the Latin American equity market involving multiday event periods have to be taken with caution.