Event study: American Express ending deal with Costco in 2016

1. Why did you choose this event? Do you believe that this event had an impact on the company's stock price?

2. Identify event date and define event window.

3. Collect daily data: You can find data: You can find data from company on yahoo finance, use S7P 500 as your market return. Make sure that there is data available for both pre and post event on that company!! If the data you have collected is in prices, transform them into returns. You can highlight the event window and highlight the actual date of the event.

a. Graph the trend of prices and returns. By looking at the graph, does the event seem to affect performance?

b. Find the mean and standard deviation of the whole sample. Now find the mean & std. deviation of pre-window and compare it to the post window. Is there any noticeable difference in mean?

4. Find if there is a difference between pre and post event returns

a. Simple Mean Return Test: t-test to see if there is a difference of mean of normal return. Follow hypothesis testing steps.

b. Mean Excess Return Test: Find excess return. Is there a difference in mean in excess returns? Follow hypothesis testing steps.

c. Regression Risk-adjusted return test: Compute Abnormal return. Run regression. Use the market model. Using the pre-window, find the intercept and slope. Using that information, what is the expected return of the companies during the window? What is the difference between actual return and expected return (abnormal return)?Was your company affect by the event? Was this consistent with your hypothesis? Calculate CARs.

d. For Robustness, use the CAPM model and a multiple regression model. What are the results? Is it consistent with the market model, or was it different? Which model and result should you believe in most?

5. Did this event impact the company in other ways than just return? Why do you think this happened? Do you expect it to happen again? How could you have capitalize on this event if you knew about it beforehand?