Error in car_brown_warner_1985 calculation?

[Debalda]

Hi Iegor,

hope you are doing well.

I think I have spotted an error in the car_brown_warner_1985 calculation. In your function, you take the mean of daily brown warner:

function (list_of_returns, car_start, car_end, percentage = 90) 
{
    ...
    car_mean <- **mean**(daily_brown_warner_1985_statistics_tidy[, 
        4], na.rm = TRUE)
    statistic <- sum(daily_brown_warner_1985_statistics_tidy[, 
        5], na.rm = TRUE)/sqrt(nrow(daily_brown_warner_1985_statistics_tidy))
  ...
}

However, with this approach I think (not completely sure though) that you take the average across day t and the average across securities i, leading to the daily average abnormal return in the event window instead of the cumulative average abnormal return across the event window.

When calculating in excel, I get the right results editing your code the following way:

{
    ...
    car_mean <- **sum**(daily_brown_warner_1985_statistics_tidy[, 
        4], na.rm = TRUE)
    statistic <- sum(daily_brown_warner_1985_statistics_tidy[, 
        5], na.rm = TRUE)/sqrt(nrow(daily_brown_warner_1985_statistics_tidy))
  ...
}

Note that in the statistics you actually take the sum function.

Let me know what your thoughts are on this.

Kind regards