Q1: Which theory do we refer to when formulating a hypothesis?
- Event-study methodology
- Signaling theory
- Cumulative abnormal adjusted return (CAR)
A1: B (A and C are methods used when processing stock price data while B is the theory used when formulating the hypothesis.)
Q2: What is the essence of event-study methodology?
- It estimates the normal stock returns and deducts this "normal returns" from the "actual returns" to derive "abnormal returns" attributed to the event
- It is a statistical method to assess the impact of an event on the value of a firm
- It can be used to elicit the effects of any type of event
A2: A (B is introduction of the theory, C is use of the theory. A is essence of the theory, explaining principle of the theory briefly)
Q3: Why do we choose Chinese listed firms as the sample for this study?
A3: Chinese listed firms' financial statements are open to the public and they have more exposure in the media than private firms.