In an event study the objective is to
A) Whether it is possible to predict stock prices.
B) How fast stock prices adjust to news.
C) Examine the cross-sectional distributions of returns.
D) Conduct a time series analysis of returns.
E) Determine normal P/E ratios.

Question

Quizplus · Accepted Answer

The objective of an event study is to examine how quickly stock prices adjust to news. The study analyzes the impact of a specific event, such as an earnings announcement or merger, on stock prices. The focus is on the immediate reaction of market participants, rather than predicting future stock prices or conducting cross-sectional or time series analyses of returns. Normal P/E ratios are also not relevant to the objective of an event study.

In an Event Study the Objective Is to