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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement
Andrew Phin
Todd Prono
Jonathan J. Reeves
Konark Saxena
Abstract

Using high frequency data, we develop an event study method to test for level shifts in beta and measure abnormal returns for events that produce such level shifts. Using this method, we estimate abnormal returns for the Troubled Asset Relief Program (TARP) announcement and find that its abnormal returns are largely realized on the first day. The abnormal returns in the remaining post event period, which show up as a drift using standard methodology, are attributed to level shifts in beta.


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Andrew Phin & Todd Prono & Jonathan J. Reeves & Konark Saxena, Level Shifts in Beta, Spurious Abnormal Returns and the TARP Announcement, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2018-081, 30 Nov 2018.
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Keywords: Event studies ; Intraday returns ; Systematic risk
DOI: 10.17016/FEDS.2018.081
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