CONDITIONAL HETEROSKEDASTICITY ADJUSTED MARKET MODEL AND AN EVENT STUDY

Stock returns series generally exhibit time-varying volatility. Theref ore, one can cast doubt on the way abnormal returns are calculated and consequently interpreted in traditional event studies. In this paper we apply a market model which accounts for GARCH effects leading to mo re efficient estimators. Using a sample of divestitures, we empiricall y investigate hero this adjustment affects the magnitude of the abnorm al returns associated with an event.