Recovery of hidden information from stock price data: A semiparametric approach |
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Authors: | George Vachadze |
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Institution: | (1) National Economic Research Associates, Inc. (NERA), 1166 Avenue of the Americas, 10036 New York, NY |
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Abstract: | This paper proposes a new methodology for measuring announcement effect on stock returns. This methodology requires no prior
specification of the event day, event, and estimation windows, and therefore is a generalization of the traditional event
study methodology. The dummy variable, which indicates whether the event occurred or not, is treated as missing. The unconditional
probability of abnormal return is estimated by the EM algorithm. The probability that announcement is effective and the average
announcement effect are estimated by the Gibbs sampler. How the method works is demonstrated on simulated data and IBM stock
price returns. |
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Keywords: | |
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