1. Measurement of Abnormal Returns from Small Firms
- Author
-
Alison Morgan and leuan Morgan
- Subjects
Estimation ,Statistics and Probability ,Heteroscedasticity ,Economics and Econometrics ,Financial economics ,Diagnostic test ,Autoregressive model ,Market risk ,Abnormal return ,Order (exchange) ,Stock exchange ,Economics ,Econometrics ,Statistics, Probability and Uncertainty ,Social Sciences (miscellaneous) - Abstract
Correction for heteroscedasticity in returns from portfolios long in small firms and short in large firms listed on the New York Stock Exchange reduces the estimate of market risk and increases the estimated abnormal return. Greatly improved diagnostic test statistics are obtained, strengthening the evidence for the existence of positive average abnormal returns from small firms. Periodicity of order 6 and 12 months is identified. The estimation procedure operates by exploiting the autoregressive pattern of heteroscedasticity in the return data.
- Published
- 1987
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