The rapid integration of international capital markets is apparent from the increasing number of foreign firms listed on the U.S. stock exchanges. A number of event studies have used stock returns of foreign firms listed on U.S. exchanges to examine the stock price reactions to various announcements. However, some researchers have raised concerns over the choice of event study models in the study of foreign firms. By employing actual stock return data in various simulation scenarios, this study compares the powers of alternative event study methods for foreign firms. The results show that all models and equity indexes perform equally well when there is no clustering of event dates, though there are high Type I and Type II errors when event dates cluster together.

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