Abnormal Returns or Mismeasured Risk? Network Effects and Risk Spillover in Stock Returns

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ID: 69861
2019
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Abstract
Recent event study literature has highlighted abnormal stock returns, particularly in short event windows. A common explanation is the cross-correlation of stock returns that are often enhanced during periods of sharp market movements. This suggests the misspecification of the underlying factor model, typically the Fama-French model. By drawing upon recent panel data literature with cross-section dependence, we argue that the Fame-French factor model can be enriched by allowing explicitly for network effects between stock returns. We show that recent empirical work is consistent with the above interpretation, and we advance some hypotheses along which new structural models for stock returns may be developed. Applied to data on stock returns for the 30 Dow Jones Industrial Average (DJIA) stocks, our framework provides exciting new insights.
Reference Key
bhattacharjee2019abnormaljournal Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Bhattacharjee, Arnab;Roy, Sudipto;
Journal journal of risk and financial management
Year 2019
DOI
DOI not found
URL
https://www.mdpi.com/1911-8074/12/2/50
Keywords
Technology economics as a science finance political science mathematics political science (general) risk in industry. risk management accounting. bookkeeping

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