Econometrics of Event Studies

We review the Handbook of Corporate Finance, Volume 1, specifically Chapter 1 titled "Econometrics of Event Studies," which provides a detailed examination of the methodological approaches used in event studies within finance. The chapter, authored by S.P. Kothari and Jerold B. Warner, explores the design, execution, and interpretation of event studies, which analyze the impact of specific corporate events on stock prices. It covers essential aspects such as event study literature, methodologies for characterizing event study methods, various test statistics, and considerations for long-horizon event studies. Furthermore, it addresses potential issues like risk adjustment, errors in expected returns, and approaches to abnormal performance measurement, offering a comprehensive guide to conducting rigorous empirical research in this area of corporate finance.