Originally from the American Review of International Arbitration (ARIA)

I.     INTRODUCTION

In this note, we explain what an ‘event study’ is and how the technique can be used to assess liability and damages in an arbitration. The note was written following the 2019 Fordham International Arbitration and Mediation Conference in the context of a session on Economic Issues in International Arbitration, in which one of the authors, Dr. Meschi, co-presented an overview of event studies and their applications.

The note is organised as follows. First, we introduce the rationale for event studies, explaining the underlying economic and financial theory. Second, we move away from the theory to explain how an event study works in practice and how it is typically implemented. Third, we explain how confounding news events (which are some of the most common practical and conceptual issues encountered by practitioners) can be addressed and what implications they have for the use and reliability of event studies for the purpose of assessing damages.

II.    WHAT IS AN EVENT STUDY?

An event study is an empirical methodology used to measure the effect of new information on the equity value of a listed company. […]