preserving religious identity through education economic analysis and evidence from the us abstract this paper models the decision of religious parents to send their children to private religious schools as reflecting their desire to shield their children from external influences and thus preserve their religious identity it follows that when the share of the minority in the local population grows and outside influences become less threatening the demand for separate religious schooling among the members of the religious group decreases this pattern implies concavity in the relationship between enrollment in private and religious schooling and the share of the religious group in the population we present empirical evidence from united states county data on catholic and private school enrollment that strongly supports our theory the paper contributes to a better understanding of the demand for religious education

are church and state substitutes evidence from the 1996 welfare reform abstract churches provide community services similar to those provided by the government but there has been no convincing analysis of the extent to which church activity can substitute for government activity to address this important issue this paper uses a new panel data set of presbyterian church usa congregations to regress both church member donations and a church s community spending on a number of variables including government welfare expenditures a provision of the 1996 welfare law that decreased the availability and use of welfare services by non citizens serves as an instrument to identify the causal effect of government spending on church activity the results show that church activities substitute for government activities extrapolating the findings to all denominations the estimated crowd out effect lies between 20 and 38 cents on the dollar the results are subjected to a number of robustness tests

understanding the penalties associated with corporate misconduct an empirical examination of earnings and risk we examine the relationship between allegations of corporate misconduct and changes in profitability and risk of the alleged offender profitability is measured as reported earnings and analysts earnings forecasts risk is measured as stock return volatility and concordance among analysts forecasts decreases in earnings and increases in risk are found to accompany allegations of misconduct and although the results are somewhat sensitive to the earnings and risk metrics used the changes are found to be consistently greater for related party offenses the importance of reputational penalties is underscored by analysis of the association between allegation related changes in firm value and changes in earnings and risk

the resolution of financial distress most models of financial structure embody an assumption about financial distress that causes debt to be costly to the issuing firm this approach has been criticized on the grounds that the assumed costs could be avoided by a costless financial reorganization in this article we show that despite the possibility of costless reorganization it may be rational for firms to incur significant costs in the resolution of financial distress the main assumptions that give rise to our results are the existence of asymmetric courts to impose a reorganization on the claimants of a firm article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

operational and reputational risk in the european banking industry the market reaction to operational risk events abstract in this paper i study the stock market reaction to the announcement of operational losses in european financial companies accounting for the effect of the nominal loss amount allows for an examination of the reputational damage caused by operational loss events the analysis is based on a sample of 136 operational losses stemming from a database of the association of german public sector banks bundesverband offentlicher banken vob all operational loss events affect european financial institutions with settlements reported by the press between january 2000 and december 2009 in line with previous literature i find a significant negative stock price reaction to the first press announcement of operational losses results show that the stock market also reacts negatively to the settlement announcement as losses are confirmed and the loss amount is known even after accounting for the nominal loss amount cumulative abnormal returns are negative following the date of the initial news article and the settlement date indicating damages to the reputation of the firm suffering the operational loss multivariate regression results suggest that reputational damages are rather influenced by firm characteristics than characteristics of the operational loss event companies with a high ratio of liabilities to total assets suffer more severe damages to reputation from operational losses than companies with more equity

further international evidence on asset pricing the case of the spanish capital market abstract a multivariate framework is used in order to study the price formation of risky assets in the spanish capital market issues regarding the efficiency of the spanish value weighted stock market index the validity of equilibrium considerations the size effect and the nature of the return generating process during january are analyzed

multivariate tests of the zero beta capm abstract a cross sectional regression test csrt of the capm is developed and its connection to the hotelling t2 test of multivariate statistical analysis is explored algebraic relations between the csrt the likehood ratio test and the langrange multiplier test are derived and a useful small sample bound on the distribution function of the csrt is obtained an application of the csrt suggests that the crsp equally weighted index is inefficient but that the inefficiency is not explained by a firm size effect from february to december

faith based charity and crowd out during the great depression abstract interest in religious organizations as providers of social services has increased dramatically in recent years churches in the u s were a crucial provider of social services through the early part of the twentieth century but their role shrank dramatically with the expansion in government spending under the new deal in this paper we investigate the extent to which the new deal crowded out church charitable spending in the 1930s we do so using a new nationwide data set of charitable spending for six large christian denominations matched to data on local new deal spending we instrument for new deal spending using measures of the political strength of a state s congressional delegation and confirm our findings using a different instrument based on institutional constraints on state relief spending with both instruments we find that higher government spending leads to lower church charitable activity crowd out was small as a share of total new deal spending 3 but large as a share of church spending our estimates suggest that benevolent church spending fell by 30 in response to the new deal and that government relief spending can explain virtually all of the decline in charitable church activity observed between 1933 and 1939

an empirical investigation of u s firms in reorganization the purpose of this paper is to understand the institutional features of chapter 11 from an empirical examination of thirty firms that have emerged from reorganization we find the recontracting framework of chapter 11 to be complex lengthy and costly violations of absolute priority in favor of stockholders are frequently encountered these deviations may result from the bargaining process of chapter 11 or from a recontracting process between creditors and stockholders which recognizes the ability of stockholder oriented management to preserve firm value an example of such recontracting addresses myers underinvestment problem an investigation of the effects of chapter 11 on the pricing of risky debt is also provided the purpose of this paper is to understand the institutional features of chapter

on multivariate tests of the capm abstract this paper evaluates the power of multivariate tests of the capital asset pricing model the results indicate that when employing an unspecified alternative hypothesis the ability of the tests to distinguish between the capm and other pricing models is poor an upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the capm are due to missing factors this upper bound explains the low power of the tests

a note on the geometry of shanken s csr t2 test for mean variance efficiency abstract shanken 1985 derives a test for the zero beta capital asset pricing model capm which as he points out is equivalent to a test of the mean variance efficiency of the market portfolio this note illustrates the geometry of shanken s test in the mean variance space

an empirical investigation of international asset pricing we investigate several asset pricing models in an international setting we use data on a large number of assets traded in the united states japan the united kingdom and france the models together with the hypothesis of capital market integration imply testable restrictions on multivariate regressions relating asset returns to various benchmark portfolios we find that multifactor models tend to outperform single index models in both domestic and international forms especially in their ability to explain seasonality in asset returns we also find that the behavior of the models is affected by changes in the regulatory environment in international markets

joint estimation of factor sensitivities and risk premia for the arbitrage pricing theory the apt is represented as a multivariate regression model with across equations restrictions both observed and unobserved latent macroeconomic factors are included thus generalizing and unifying two previous strands of literature large portfolios representing unobserved factors are treated as endogenous and nonlinear 3sls estimates are shown to differ sharply from estimates that ignore this endogeneity using monthly stock returns and six factors we cannot reject january effects the following results are invariant with respect to the inclusioh of january effects we reject the capm in favor of the apt however we cannot reject the apt restrictions on the linear factor model most empirical work on the arbitrage pricing theory apt has followed a factor analysis approach papers by burmeister and wall 5 chan chen and hsieh 7 chen roll and ross 9 and mcelroy and burmeister 22 represent some exceptions in which measured macroeconomic factors such as unexpected inflation are used to explain asset prices in an apt or multifactor model both the factor analysis approach and the measured macroeconomic factor approach have their merits the primary advantages of using measured economic factors are 1 the factors and their apt prices in principle can be given economic interpretations while with a factor analysis approach it is unknown what factors are being priced and 2 rather than using only asset prices to explain asset prices measured macroeconomic factors introduce additional information linking asset price behavior to macroeconomic events in this exploratory paper we investigate an apt or multifactor model in which there are both measured macroeconomic factors and other nonobserved factors we impose the nonlinear across equation apt pricing restrictions exactly by using three multivariate estimation methods iterated nonlinear weighted least squares itnlwls iterated nonlinear seemingly unrelated regressions itnlsur and iterated nonlinear three stage least squares itnl3sls see gallant 13 and discussion below the appropriate estimation method depends upon alternative assumptions about the error terms nonsystematic risk in the asset returns equations the primary objective of this work is to investigate whether or not certain apt tests are sensitive to these alternative error assumptions the details of which are given in the text our focus is on the interrelation

the political consequences of income shocks explaining the consolidation of democracy in france abstract this study analyzes the circumstances that enabled france to become in the late nineteenth century the first stable parliamentary democracy with universal male suffrage in europe it establishes a causal relationship between short term variations in local income and the electoral support for the coalition of republican parties that represented the newly established regime the results suggest the republican coalition won the parliamentary elections because most french regions did not suffer from transitory negative income shocks stemming from heavy precipitations they thus raise questions about the rationality of voters and ultimately the actual causes of the consolidation of democracy in france

the protestant fiscal ethic religious confession and euro skepticism in germany during the european sovereign debt crisis most countries that ran into fiscal trouble had catholic majorities whereas countries with protestant majorities were able to avoid fiscal problems we find that christian conservative members of the german parliament from constituencies with higher shares of protestants were more likely to vote against a third bailout for greece survey data show that views on the euro differ between german protestants and non protestants at the individual level too among protestants concerns about the euro have compared to non protestants increased during the crisis we show that this increase in concern is linked to a reduction of protestants subjective well being we use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns emphasis on moral hazard concerns in protestant theology may thus still shape economic preferences jel d72 e00 i31 z12

empirical evidence of risk shifting in financially distressed firms this paper provides evidence of risk shifting behavior in the investment decisions of financially distressed firms using a real options framework i show that shareholders risk shifting incentives can reverse the expected negative relation between volatility and investment i test two hypotheses that are consistent with risk shifting behavior i volatility has a positive effect on distressed firms investment ii investments of distressed firms generate less value during times of high uncertainty empirical evidence using 40 years of data supports both hypotheses i further evaluate the effect of various firm characteristics on risk shifting and estimate the costs of the investment distortion

economic and security consequences of supreme values islamic societies have in contemporary times lagged western societies in income growth and human development indicators the supreme values of radical islam further de prioritize economic achievement and impose self deprivation on own populations this paper investigates the reasons for economic outcomes under islam contemporary illustrations are also provided of the self deprivation predicted from pursuit of the supreme value objectives of radical islam the self deprivation is placed in a rent seeking context

asset pricing in a generalized mean lower partial moment framework theory and evidence a new asset pricing model that generalizes earlier results in the downside risk literature is developed and empirically tested using a multivariate approach by specifying risk as deviations below any arbitrary target rate of return the generalized mean lower partial moment mlpm model overcomes the limited appeal of earlier formulations and moreover a large class of extant pricing models using alternative risk measures variance semivariance semideviation probability of loss etc becomes special cases of the new framework empirical tests indicate that the new model cannot be rejected against an unspecified alternative for a large set of target rates of return the traditional capm on the other hand is rejected as a well specified alternative the mlpm target rates inferred from market data appear to be related to equity market mean returns rather than to the riskfree rate the target rate that is implicit in the capm and explicit in earlier downside risk formulations the attractiveness of downside risk measures for decision making purposes has been noted in the financial economic literature for over a quarter of a century 1 risk from this perspective is measured in terms of deviations below some exogenously prespecified target rate of return and a formal analysis of these risk measures for various utility functions has been presented by bawa 1975 in terms of the lower partial moment lpm of the asset distributions the appeal of these risk measures has been based in part on their consistency with the way individuals actually perceive risk notwithstanding its intuitive appeal this area of research has been virtually neglected in recent years we believe that this disaffection with downside risk models tends from two sources first earlier models of this genre exogenously specify the target rate to equal the risk free interest rate in the absence of a satisfactory theory for explaining how investors establish their target rates this assumption as argued herein has been motivated more by technical reasons than economic considerations second empirical tests

the likelihood ratio test statistic of mean variance efficiency without a riskless asset abstract the question whether a given porfolio is mean variance efficient is a basic problem of investment analysis mean variance efficiency is also the basis of the capital asset pricing model this paper presents the explicit form of the likelihood ratio test of the hypothesis that a given portfolio or a particular market index is ex ante mean variance efficient in the case where there is no riskless asset geometric relations are illustrated to provide intuition about the constrained maximum likelihood estimators and the test statistic and two simple economic interpretations of the test are given

potential performance and tests of portfolio efficiency abstract the potential performance of an asset set may be obtained by choosing the portfolio proportions to maximize the sharpe 1966 performance measure if a portfolio has a sharpe measure equivalent to the potential performance of the underlying set of assets then it is efficient multivariate statistical procedures for comparing potential performance and testing portfolio efficiency are developed and then evaluated using simulations two likelihood ratio statistics are then used to compare stock and bond indices against sets of 20 and 40 portfolios the procedures are also compared to the gibbons 1982 methodology for testing financial models

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

currency hedging for international portfolios this paper examines the benefits from currency hedging both for speculative and risk minimization motives in international bond and equity portfolios the riskreturn performances of globally diversified portfolios are compared with and without forward contracts over the period 1974 to 1990 inclusion of forward contracts results in statistically significant improvements in the performance of unconditional portfolios containing bonds conditional strategies are also implemented both in sample and out of sample and are shown to both significantly improve the risk return tradeoff of global portfolios and to outperform unconditional hedging strategies whether international portfolios should be hedged against currency risks is the subject of an active debate the theoretical side of the debate has been closely associated with two strands in the academic literature international asset pricing and optimal hedging in the futures markets in the international asset pricing model iapm of solnik 1974 optimal portfolios contain positions in forward contracts or equivalently foreign currency denominated bills these positions which can differ from the positions in foreign stocks have since been termed hedges black 1990 shows that under additional assumptions the hedge ratios should be identical for all investors regardless of their nationality universality and that investors should never fully hedge their foreign currency exposures similarly theoretical models from the futures literature produce demands for hedging instruments that contain both speculative and hedging components the empirical issue unanswered so far is whether adding forward contracts to international portfolios significantly improves the risk return profile of global investments empirical research has barely begun to respond to the challenges of theoretical models there exists little empirical evidence on either the relevance of black s universal hedge ratios or the optimality of hedge ratios less than one instead researchers have concentrated on the benefits of fully hedging exchange risk for example eun and resnick 1988 indicate that stock portfolios perform better when fully hedged but offer no statistical tests

operational risk and its impact on north american and british banks abstractthis study examines the financial impact of operational risk and its loss announcements on the value of publicly traded banks in united states uk and canada there are three main findings 1 on average the market reacts more negatively to a loss s initial announcement than its settlement news 2 operational loss events cause strong reputational damage to the announcing banks and 3 the market is particularly sensitive to the announcement of losses caused by internal fraud of a large magnitude resulted in the order of restitution and that are the rulings of a regulatory investigation

risk and return abstract this paper examines the seasonality in the basic relationship between expected return and risk during 1935 82 the results reveal that the positive relationship between return and risk is unique to january the risk premiums during the remaining eleven months are not significantly different from zero

economic growth and the separation of church and state the french case i introduction historically the decision to establish or forsake a state religion was seldom democratic it resulted from the political leaders willingness to consolidate their hold on power and did not reflect the people s attitudes toward a state religion even in a democracy like the united states the separation of church and state did not result from a popular vote but was derived from the first amendment of the u s constitution and subsequently reaffirmed by the supreme court france is actually one of the few countries where citizens had a say in the separation between church and state in 1905 the democratically elected french representatives adopted a bill that separated religion from the state the bill abolished the concordat which had been instituted by napoleon bonaparte in 1801 so as to govern the relationship between the french state and the roman catholic church under this arrangement the members of the catholic clergy were paid by the french state which in return had a say in their appointment the 1905 bill ended state subsidies for the church but also governmental interventions in the appointment of the church s personnel the passing of the 1905 bill illustrates the progressive rejection of the church in french politics it occurred at a time when france remained an agricultural country even though a growing share of the population worked in industrial activities in addition because primary education had been made compulsory in 1881 for both boys and girls illiteracy was decreasing nevertheless there remained many disparities between the different french departements 1 for instance the share of the french army s conscripts who were illiterate substantially varied between the different departements from 0 32 in haute savoie to 16 89 in morbihan in the academic literature economists have shown that religious laws have consequences on economic growth and human capital for example kuran 2003 botticini and eckstein 2005 hillman 2007 but they still debate the causal relationship between a nation s actual degree of religious observance and economic development there are indeed two major theories of religiosity the religion market model and the secularization hypothesis the religion market model developed by iannaccone 1991 iannaccone and stark 1994 iannaccone finke and stark 1994 and gill 1999 among others argues that religious participation is mainly supply driven in other words the government s intervention such as the establishment of state religion is a major determinant of religiosity however following weber 1905 proponents of the secularization hypothesis such as chaves 1994 and bruce 2001 argue that religious participation is demand driven they consider that economic development which includes industrialization an increase in literacy and wealth and a decrease in fertility rates entails a decline in religiosity this secularization process supposedly leads individuals to define themselves as less religious and decreases the influence of religion on social and political institutions as a matter of fact mccleary and barro 2006 find in a study of religiosity in 68 countries that economic development has an overall negative effect on religiosity urbanization also makes individuals less observant but education and the presence of children are positively correlated with religiosity still studies by finke and stark 1992 iannaccone and stark 1994 and stark 1999 among others argue that there is no empirical evidence to support secularization theories in particular the secularization hypothesis predicts that the separation between religion and state should become widespread as countries become richer but barro and mccleary 2005 cannot find any link between wealth measured by a country s gross domestic product gdp and the current existence of a state religion

deregulating religion the economics of church and state traditional religious research fails to recognize religion as a market phenomenon it especially overlooks supply side factors that shape the incentives and opportunities of religious firms emphasizing instead demand side shifts in the perceptions tastes and needs of consumers this paper reviews the effects of government actions that alter religious supply a longer version appears in economic inquiry 40 2 april 1997

agency problems of debt convertible securities and deviations from absolute priority in bankruptcy it has been suggested that convertible debt can be used to reduce the tendency toward excessive risk taking in a firm that includes debt in its capital structure we show that the ability of convertible debt to perform this function is greatly reduced if stakeholders can trade in derivative securities with payoffs contingent on the cash flows of the firm we show further that bankruptcy courts can ensure the same result precisely by deviating from absolute priority our model explains two real world phenomena one why bankruptcy law seems to be structured in such a way as to favor equity holders and facilitate deviations from absolute priority and two why small firms are more likely to use convertible debt

a monte carlo investigation of the accuracy of multivariate capm tests abstract in a multivariate regression model relating individual returns to the market return capm implies non linear restrictions on the parameters several asymptotically valid tests of these restrictions have been suggested the existing monte carlo evidence shows that some of these tests are unreliable for reasonable sample sizes but does not indicate well which tests are reliable this paper reports the results of an extensive monte carlo experiment shanken s csr test and jobson and korkie s corrected likelihood ratio test are quite accurate in all cases we consider

can internal migration foster the convergence in regional fertility rates evidence from 19th century france this paper offers an explanation for the convergence of fertility rates across french departements in the second half of the nineteenth century that emphasises the diffusion of information through internal migration it tests how migration affected fertility by building a decennial bilateral migration matrix between french departements for 1861 1911 the identification strategy uses exogenous variation in transportation costs resulting from the construction of railways the results suggest that the convergence towards low birth rates can be explained by the diffusion of cultural and economic information pertaining to low fertility behaviour by migrants especially by migrants to and from paris

which countries have state religions among 188 countries 72 had no state religion in 2000 1970 and 1900 58 had a state religion throughout and 58 had 1 or 2 transitions we use a hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized similar forces influence a government s decision to establish a state religion consistent with the model the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion has a nonlinear relation with population and has little relation with per capita gdp the probability of state religion decreases sharply under communism but lagged communism has only a weak effect with costly adjustment for institutions the probability of state religion in 1970 or 2000 depends substantially on the status in 1900 this persistence is much stronger for countries with no major regime change than for countries with such a change

security pricing and deviations from the absolute priority rule in bankruptcy proceedings claims ultimately awarded to shareholders of firms in reorganization were examined for a sample of 30 filings under the 1978 bankruptcy reform act we measured the amount paid to shareholders in excess of that which they would have received under the absolute priority rule and found that this amount represents on average 7 6 of the total awarded to all claimants evidence is also reported that common share values reflect a significant proportion of value ultimately received in violation of absolute priority suggesting that deviations from the rule were expected by the equity markets the absolute priority rule hereafter apr states that a bankrupt firm s value is to be distributed to suppliers of capital such that senior creditors are fully satisfied before any distributions are made to junior creditors and junior creditors are paid in full before common shareholders bankruptcy reorganization proceedings however are leaving shareholders and junior creditors with valuable assets even when senior claimants receive only partial settlements as barrett and sullivan 1988 noted traditionally shareholders have been last in line their claims on a troubled company s assets have had the lowest priority and their impact on the course of bankruptcy code proceedings generally has been next to nil but lately the balance of power has been shifting warner 1977 provided one of the early discussions of the implications of deviations from the apr baldwin and mason 1983 pp 510 511 examined the resolution of claims in the massey ferguson reorganization and provided no support for the hypothesis that the market believes absolute priority rules will be enforced if the firm defaults on its financial obligations franks and torous 1989 analyzed a sample of bankruptcies that occurred during the period 1970 through 1984 and found that 21 of 27 sample cases exhibited departures from the apr more recently weiss 1990 examined 37 firms that filed for bankruptcy between 1980 and 1986 and reported that 27 of the cases involved apr violations

claimholder incentive conflicts in reorganization the role of bankruptcy law when a firm is financial distress in most cases a set of mutually advantageous reorganization plans exist this article shows that the bankruptcy code by providing rules governing the negotiation process yields a unique solution to the reorganization process in addition the structure imposed by the code mitigates the holdout problem created by the individual claimant s divergent incentives article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

orthogonal frontiers and alternative mean variance efficiency tests this paper catalogues properties of minimum norm orthogonal portfolios portfolios which minimize a quadratic objective function and have returns uncorrelated with those of a candidate portfolio that is not mean variance efficient the analysis shows that the dollar versions of these portfolios correspond to estimators of zero beta rates based on alternative statistical criteria and grouping procedures while costless orthogonal portfolios represent candidate mean variance efficiency tests it also develops inference procedures for zero and unit net investment portfolios of individual securities instead of grouped portfolios that have zero expected betas the resulting mean variance efficiency tests are reasonably insensitive to the underlying statistical assumptions i introduction most mean variance efficiency tests follow from the following simple intuition if a given portfolio p is mean variance efficient all portfolios that cost a dollar and have returns uncorrelated with those of p i e zero beta portfolios have identical expected returns hence all costless zero beta portfolios have expected returns of zero when p is mean variance efficient however the situation is altered considerably when p is not a mean variance efficient portfolio in this case roll 1980 has shown that there are portfolios that cost a dollar and have returns uncorrelated with those ofp at all levels of mean return as a consequence there are costless zero beta portfolios at all levels of expected return as well when p is inefficient mean variance efficiency tests typically involve asking whether particular costless zero beta portfolios have zero expected returns the translation of this intuition into operational test statistics is a problem in sampling theory for example when tests are based on costless portfolios with zero sample betas appropriate allowance must be made for the impact of sampling error in the sample betas on the distribution of its mean return such analysis is extremely complicated when the number of assets included in such portfolios exceeds the number of time series observations on asset returns hence previous investigations have restricted their attention to the special case where the number of assets is taken to be smaller than the number of time series observations an enormous amount has been learned about both the statistical properties and economic interpretation of two such tests in these circumstances shanken s 1985 csr test and the related likelihood ratio test of kandel 1984 a partial list of relevant papers includes roll 1979 1985 gibbons 1982 stambaugh

evidence on stock market overreaction 1986 evidence on stock market overreaction financial analysts journal vol 42 no 4 pp 74 77

investment incentives debt and warrants abstract this paper models and characterizes investment incentive problems associated with debt financing the decision problem of residual claimants is explicity formulated and their investment policies are characterized the paper also analyzes the use of conversion features and warrants to control distortionary incentives these claims reverse the convex shape of levered equity over the upper range of the firm s earnings and this mitigates the incentive to take risk it is shown that under certain conditions such claims can be constructed to restore net present value maximizing incentives and simultaneously meet the financing requirements of the firm

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach