Study reveals equivalence between log and dollar returns in event analysis.
The study compared excess log returns and excess dollar returns on event days. The researchers found that specifying event study hypotheses in terms of excess dollar returns is equivalent to specifying them in terms of excess log returns. The difference in statistical significance between the two types of returns was due to a bias in the estimator of expected excess dollar returns, an incorrect assumption of normal distribution, and a misapplication of the delta method.