Abstract
A Brown and Warner [1980, 1985] event study methodology is applied to the foreign exchange area. Comparisons of the performance of four abnormal return models are examined with simulations under different experimental conditions, such as choice of foreign currency or numeraire, level of abnormal shock, sample size, length of estimation period, market return proxy, and time period examined. The results provide practical suggestions on the selection of an event study methodology and demonstrate that some of the findings of Brown and Warner are not generalizable to the foreign exchange area.
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*Chuck C. Y. Kwok is Assistant Professor of International Business at the University of South Carolina. Dr. Kwok's research and publications concentrate in international finance and Asian business studies.
**LeRoy D. Brooks is Professor of Finance at the University of South Carolina. Dr. Brooks’ research interests are concentrated in finance and the interrelationships of finance with international business, accounting and policymaking.
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Kwok, C., Brooks, L. Examining Event Study Methodologies in Foreign Exchange Markets. J Int Bus Stud 21, 189–224 (1990). https://doi.org/10.1057/palgrave.jibs.8490332
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DOI: https://doi.org/10.1057/palgrave.jibs.8490332