A Comparison of Alternative Testing Methodologies Used in Capital Market Research

Abstract

Concern over the economic consequences of accounting regulation and policy decisions has stimulated a large body of empirical research which focuses on the impact of such decisions on firms' security prices.1 One feature common to these studies is that event time and calendar time are identical for all firms' securities included in the sample. Moreover, for several of these accounting policies (e.g., leasing, oil and gas accounting), there is industry concentration among the affected firms. These factors lead to cross-sectional correlations of the dependent variable of interest