Question

For event study; its use and importance in empirical finance is?

Answer 1

Event study is used to calculate the the impact of any event on the overall financial structure of a company. The use of event study can be reflected in relation to an event occurrence with significant change in stock price of the company.

The use and importance of event study in empirical finance is as follows-

1. An event study helps in revealing out the market informations-it reflects that any event occurrence can change the behaviour of companies stock to what extent. It also reflects the potential change in trend of a company stock due to appearance of an event.

2.it can also be used as a predictive tool in relation to how the company the stock will react to a certain market event

3. Event study can be applied to various mergers and acquisitions so it is a wider concept.