///
I guess they mean t-standardization. Clearly, authors want to show you
that under the null the whole thing SCAR or whatever follows a t
distribution. Campbell, J., A. Lo, and A. MacKinlay (1997) The
Econometrics of Financial Markets, Princeton University Press covers
this material (chapter 4) in a clear way as many other issues in
financial econometrics.
HTH, Rodrigo
-----Mensaje original-----
De: [email protected]
[mailto:[email protected]] En nombre de Nick Cox
Enviado el: Viernes, 01 de Agosto de 2008 12:52 p.m.
Para: [email protected]
Asunto: st: RE: what do they mean by standardization?
I guess most people don't have access to this and those that do are
seeing the same text as you. Apart from suggesting that you contact the
authors, my only thought is that the meaning of standardization is
itself not rigidly standardized. If something had approximately zero
mean, especially long term, then just dividing by the sd would seem to
me an acceptable flavour of standardisation.
Also note that "return" rings loud bells with perhaps 30% of Statalist
and means "go back" to everyone else.
Nick
[email protected]
Rajesh Tharyan
What do they really mean by standardization?
This is from (page 318, paragraph 3 and 4) the following paper,
Mitchell, M.L., and E. Stafford. (2000). Managerial decisions and
long-term stock price performance. Journal of Business, 73, no. 3, pp.
287-329.
The authors calculate the abnormal return (CTAR) on a portfolio of
stocks every calendar month as CTAR = Rpt- E(Rpt), Rpt is the actual
realised return, E(Rpt) is the expected return.
They then say that, "the monthly CTARs are standardized by estimates of
the portfolio standard deviation.." They then go on to say that "each
standardized monthly CTAR should have a mean of zero and be independent.
Therefore, statistical inference is based on the time series mean of
the monthly standardised CTARs and the standard error of the mean."
I am not sure if they mean Z standardization or
They simply divide by the standard deviation, Would it be right to call
that standardization?
The CTAR is an abnormal return so the null is that it is zero.
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