Event Study Analysis is an econometric method employed to quantify the impact of a specific event on an asset’s value, frequently applied in crypto to assess market reactions to announcements, protocol upgrades, or regulatory developments. It isolates and measures abnormal returns attributable to the event around its occurrence.
Mechanism
The analysis establishes a normal return model for an asset, typically using market models or constant mean return models, based on a period preceding the event. Actual returns observed during the event window are then compared against these predicted normal returns. The difference quantifies the abnormal return directly linked to the event, with statistical tests determining its significance.
Methodology
This statistical approach systematically isolates the financial impact of discrete occurrences, providing empirical evidence regarding market efficiency and information processing. It helps ascertain the speed and effectiveness with which market participants incorporate new information into asset prices, which is particularly relevant for understanding sentiment and price discovery in dynamic crypto markets.
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