The Kalman Filter in the Event Study Methodology

Revista Mexicana de Economia y Finanzas, Vol.2, No.1, pp. 81-93, 2003

25 Pages Posted: 31 Aug 2005

See all articles by Gerardo Dubcovsky

Gerardo Dubcovsky

UVM

Francisco Venegas-Martínez

Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM)

Abstract

We extend the event study methodology into a richer and more dynamic environment by including time-varying parameters. Under the Bayesian framework, useful to update relevant information in a sequential learning mechanism, we use the Kalman filter to consider time dependent parameters, and we choose the initial distribution by using an information theory framework. The proposed extension leads to a more robust set-up in appraising the impact of economic and financial events on the market value of firms.

Keywords: Event study, Kalman filter, information theory

Suggested Citation

Dubcovsky Rabinovich, Gerardo and Venegas-Martínez, Francisco, The Kalman Filter in the Event Study Methodology. Revista Mexicana de Economia y Finanzas, Vol.2, No.1, pp. 81-93, 2003, Available at SSRN: https://ssrn.com/abstract=792947

Gerardo Dubcovsky Rabinovich (Contact Author)

UVM ( email )

Calzada de Tlalpan No. 3058. Santa Ursula Coapa
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Mexico
91385000 (Phone)

HOME PAGE: http://www.uvmnet.edu

Francisco Venegas-Martínez

Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM) ( email )

Av. Eugenio Garza Sada #2501
Col. Tecnológico
Monterrey, Nuevo León 64849
Mexico

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