November 2018

Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement

Andrew Phin, Todd Prono, Jonathan J. Reeves, and Konark Saxena


Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its abnormal returns are largely realized on the first day. The abnormal returns in the remaining post event period, which show up as a drift using standard methodology, are attributed to level shifts in beta.
Accessible materials (.zip)

Keywords: Event studies, intraday returns, systematic risk


PDF: Full Paper

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Last Update: January 09, 2020