Review of Quantitative Finance and Accounting

, Volume 36, Issue 4, pp 491–516

The advantages of using quarterly returns for long-term event studies

  • Ronald Bremer
  • Bonnie G. Buchanan
  • Philip C. EnglishII
Original Research

DOI: 10.1007/s11156-010-0191-2

Cite this article as:
Bremer, R., Buchanan, B.G. & English, P.C. Rev Quant Finan Acc (2011) 36: 491. doi:10.1007/s11156-010-0191-2


The main purpose of this paper is to explore the low power and methodological problems as they continue to plague long-term event study research. We investigate long-term tests (up to 2 years) performed on non-overlapping quarterly time frames as a solution. Components of commonly employed characteristic-based matching processes are examined as the source of low power. Single “best” matching firms don’t statistically match their event firms at the time of the event and are vastly inferior to matching with portfolios. A modified market mean method which uses the securities continuously traded during the calendar event period, is shown to be well specified, have comparable power and avoid the costs of more complex matching methodologies. Contrary to popular perception, increased power derives from the decreased variance in comparison returns; not from an increased covariance between comparison firm returns and event firm returns. The tests are easy to implement, well-specified and have higher power when based on quarterly versus monthly data.


Long-horizon performance studiesMatching characteristics

JEL Classification


Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Ronald Bremer
    • 1
  • Bonnie G. Buchanan
    • 2
  • Philip C. EnglishII
    • 3
  1. 1.Department of Information Systems and Quantitative Studies, Rawls College of BusinessTexas Tech UniversityLubbockUSA
  2. 2.Department of Finance, Albers School of BusinessSeattle UniversitySeattleUSA
  3. 3.Department of Finance and Real Estate, Kogod School of BusinessAmerican UniversityWashingtonUSA