Anna Blajer-Gołębiewska

University of Gdansk

a.blajer@ug.edu.pl

Stock Exchanges Indices and Abnormal Returns

in the Crisis Condition

Abstract: In the event study methodology it is recommended to use buy-and-hold abnormal return approach, based on reference portfolio or a stock exchange index, to estimate abnormal returns in the long-run. There is growing literature on the biased BHAR estimates problem, that can result from the common estimation procedures. However, in the crisis condition, application of appropriate reference portfolio seems to be crucial. The aim of this research is to identify the impact of application of different stock exchange indices, as reference portfolios, on results obtained in the BHAR methodology in the crisis condition. The common practice is to use indices based on a sector in which the analysed company is operating or indices based on the size classification. The main thesis is that the application of one of these reference indices, especially in the crisis condition leads to rates of return, which can be considerably different in the case of another reference index. For analysis purposes two representative sectors of the Warsaw Stock Exchange were chosen. The research covers real BHAR calculations and comparative analyses of obtained results from different points of view: states of economy, market sectors and sizes of companies.

Keywords: Financial Markets, Portfolio Choice, Investment Decisions, Asset Pricing, Financial Crises

JEL Classification: G1, G01, G11, G12.