| Article ID: | iaor201522864 |
| Volume: | 9 |
| Issue: | 4 |
| Start Page Number: | 343 |
| End Page Number: | 348 |
| Publication Date: | Dec 1986 |
| Journal: | Journal of Financial Research |
| Authors: | Atchison Michael D |
| Keywords: | investment, statistics: empirical, simulation |
Numerous studies employ betas computed with the ordinary least squares technique and daily returns. However, betas computed with OLS and daily returns are biased and inconsistent due to nonsynchronous trading periods or differences in trading frequency. The purpose of this study is to evaluate the effect of trading frequency on event studies. Brown and Warner (1985) investigated this and several other problems associated with daily returns and found no effect. However, they did not analyze the trading frequencies of the securities in their sample. This study uses a computer simulation for which trading frequency is an input, and, thus, tests stocks with known trading frequency.