Event Study of Stock Portfolios

Challenge

Analyzing the impact of external events on stock prices and other financial instruments is a relevant question in modeling capital market data. Analyzing market movements upon the occurrence of specific events often forms the basis for simple trading strategies. Together with our client, an international financial institution, we developed a standardized tool for conducting event studies.

Approach

Based on several hundred international stock time series and over 1,000 considered events, we developed a framework for conducting a comprehensive event study. Users can perform a complete statistical analysis of the impact of events or specific subgroups of events on the stock price of individual or all considered companies. Various models can be selected to determine the abnormal return (AR) of the price movement. New events can be easily loaded and processed via an Excel interface. The model retrieves prices either manually or through appropriate online sources. The study results are automatically processed and exported.

Result

The developed model provides our client with a foundation for statistical analysis of various events and supports the creation of new trading strategies. The methodologies used have become an integral part of analysis and data-driven decision-making.