This assignment focuses on Dividend announcements on corporate stocks. There is also a description of Event study approach in UK.

Dividend announcements on corporate stocks : Event study approach in UK


Using the “Event study approach” evaluate the influence of dividend announcements on corporate stocks. For the study, author should choose 15 companies from USA and 15 companies from United Kingdom, regardless of sector.

The example for direct methodology should be considered the paper at Methodology section described in the paper, should e followed directly applied by author to the chosen 15 USA and 15 UK companies.

Dividend announcements on corporate stocks : Event study approach in UK

For USA companies index s&p500   should be used as a proxy for finding market prices. So, for UK companies FTSE 100 index. Also, instead of +-10 days used in the work, interval of +-30 days from announcement should be used.

After that, it should compute abnormal and cumulative returns for discrete returns. Besides,it used following formulas for   calculation of discrete returns and expected returns. To compute the expected returns, it should regress stock returns and index returns to find out intercept and slope of the market model.

Dividend announcements on corporate stocks : Event study approach in UK

(1) Rit= (Pit-Pit-1+Dit)/pit-1 (2) Rt=a+b*(RMt) +Ut, t=1, 2 …T.  So, in the last part, abnormal  returns   equal  to the difference between actual stock returns and estimated returns that derived from the market model. Also,  (3) ARit=Rit-(a+b*RMt). Cumulative abnormal   returns  equal   to   the summation of abnormal returns in a length of times.  T = t2 (4) CAR (t1, t2)=Σ (ARt) T = t1  T-statistic test is an indicator to show whether market reactions  on  the  announcement  date affect  a  firm‟s value  or  not.  In  this  order,  it should  test  abnormal returns and cumulative returns.  (5) T-test=AR/ (6) t-test=CAR(t1,t2)/ [(T) ^0.5]*(

(Methodology copied from the paper.)

Empirical results should be presented in a form of graphs, similar to example paper. So, detailed explanation i]s needed for every table created. Empirical results, obtained from the graphs should described separately for USA and UK companies. Then, writer should compare results of UK and USA companies. Then,  check if there is some similarities or differences between the obtained empirical results and describe them in details.

Detailed Instructions


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