An evaluation of testing procedures for long horizon event studies

James S. Ang, Shaojun Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

23 Citations (Scopus)


We conduct a comprehensive simulation study to evaluate testing procedures for long horizon event studies. The simulation results raise the following concerns about some popular practices: (1) using the four-factor model that includes the Fama-French three factors and a momentum-related factor causes serious over rejection of the null hypothesis; (2) using reference portfolios as benchmark tends to overestimate event firms' long-term returns; and (3) the computation-intensive bootstrap test has low power for long event horizons. Moreover, unless the number of event firms in a study is very large, all testing procedures suffer substantial loss of power quickly as event horizon increases, especially for samples of small firms. Of particular interest, the combination of the nonparametric sign test with a single firm benchmark shows the best performance consistently in our simulations.
Original languageEnglish
Pages (from-to)251-274
Number of pages24
JournalReview of Quantitative Finance and Accounting
Issue number3
Publication statusPublished - 1 Nov 2004
Externally publishedYes


  • bootstrap test
  • Fama-French factor model
  • long-term return
  • momentum

ASJC Scopus subject areas

  • Accounting
  • General Business,Management and Accounting
  • Finance


Dive into the research topics of 'An evaluation of testing procedures for long horizon event studies'. Together they form a unique fingerprint.

Cite this