Event Study with Latent Variables
Posted: Thu Mar 15, 2018 5:07 pm
Dear All,
I am a doctoral student and focus my work on corporate M&A. I would highly appreciate any input on my question!
I try to measure the effect of a Type II multi-dimensional second-order construct (reflective-formative type) as an independent variable on cumulative abnormal returns (CAR) as the dependent variable (DV). More precisely, my DV is the stock price reaction to M&A announcements.
Hence I try to combine survey data (latent variables) with stock market data. My controls largely consist of accounting data.
(1) Is my understanding correct, that I should calculate CAR for each transaction in STATA as the calculation in STATA more convenient and then I integrate the CARs in my dataset and calculate the relation between the IV (latent variable) and DV (CARs) in SmartPLS?
I also would integrate control variables (leverage, Tobin'sQ, Market Cap, etc.) in SmartPLS and would treat them as single item measurs (same for CARs). Would this be the right way to go along?
(2) It it correct that another possible way is to estimate the latent construct scores in SmartPLS and incorporate those in STATA to calculate the multivariate regression for my event study there (latent construct scores as IV and CAR as DV)? Is this way possible / as clean as the other one as well?
Thank you so much for your help!
Kind regards,
Christian
I am a doctoral student and focus my work on corporate M&A. I would highly appreciate any input on my question!
I try to measure the effect of a Type II multi-dimensional second-order construct (reflective-formative type) as an independent variable on cumulative abnormal returns (CAR) as the dependent variable (DV). More precisely, my DV is the stock price reaction to M&A announcements.
Hence I try to combine survey data (latent variables) with stock market data. My controls largely consist of accounting data.
(1) Is my understanding correct, that I should calculate CAR for each transaction in STATA as the calculation in STATA more convenient and then I integrate the CARs in my dataset and calculate the relation between the IV (latent variable) and DV (CARs) in SmartPLS?
I also would integrate control variables (leverage, Tobin'sQ, Market Cap, etc.) in SmartPLS and would treat them as single item measurs (same for CARs). Would this be the right way to go along?
(2) It it correct that another possible way is to estimate the latent construct scores in SmartPLS and incorporate those in STATA to calculate the multivariate regression for my event study there (latent construct scores as IV and CAR as DV)? Is this way possible / as clean as the other one as well?
Thank you so much for your help!
Kind regards,
Christian