7.10 Summary

This exercise showed you how to do event study. Although this was a basic example, it conveys the importance of event study methodology. The critical aspect of an event study is that we are required to have a benchmark, which typically is a factor model such as Fama-French 3 or 5 factor model. Whether this model is the best benchmark is certainly up for a debate.

Using event study methodology we showed that Donald Trump’s Twitter attacks on brands are not necessarily leading up to shareholder value loss. Although we found that Amazon shareholders were harmed by Trump tweet, other brands did not have any negative impact.