I have been working on a dataset with stock prices for many different companies, and need to write out an estimation equation for the regression.
First off, I have used the predict.lm function to make predicted returns for 2022 (based on market returns from 2021). Then the abnormal return are made from the real returns minus the predicted returns. (so the market model is utilized)
I am doing an event study using these numbers, and are looking at four events within the event window.
The estimation equation so far:
In R I use this formula: lm(abn_returns~ event1+ event2 +event3+ event4, data=eventwindow_subdf[eventwindow$event_14days==1,])
So the estimation values are the four events and the rest of the event window is used as the sample period.
In the equation I am therefore adding the betas as dummies, where the dummy is 1 if the event is taken into account in the regression.
What I am really confused about is that when the estimates are generated, it is the estimate of all companies combined. Thus, I should not add "i" for company specifics as subscript for the variables? Or should I use the summation symbol to show that all the abnormal returns of the stock prices of the different companies are combined?
