Summary of key results · M06A Events, sectors, factors

Result	Formula
SUE	$(d_q - \hat\delta_q)/\hat s_q$ , $d_q = E_q - E_{q-4}$ (6A.1)
Drift from naive expectations	$\mathbb E[r^{ann}_{q+k} \mid \text{SUE}_q] = c\,\rho_k\,\text{SUE}_q$ (6A.2)
Extreme-group spread, normal SUE	$\lambda \cdot 2\varphi(z_{1-1/n})\,n$ ; deciles 3.510, quintiles 2.800 (6A.3)
CAR test, market model	$t = CAR/(\hat\sigma\sqrt{v})\sim t_{L_1-2}$ , $v = L_2 + \gamma'X^(X'X)^{-1}X^{\prime}\gamma$ (6A.4)
Clustered events	$\operatorname{Var}(\overline{AR}) = \sigma^2[1 + (N-1)\bar\rho]/N$
Event variance from two expiries	in M09A (9A.13); $\mathbb E\lvert\text{move}\rvert = m\sqrt{2/\pi}$
Buyback accretion	accretive iff $(E/N)/P_b > r(1 - \tau)$ (6A.6)
Buyback value transfer	$v' = (V - C)/(N - C/P_b) > V/N$ iff $P_b < V/N$ (6A.7)
Demerger	$P_{cum} = P_{ex} + qP_{child}$ ; cost split by book value transferred (6A.8)–(6A.9)
Open-offer tender value	$aP_o + (1 - a)P_1$ , $a = f/t$ (6A.10)
Delisting discovered price	$F^{-1}\big((0.9 - h)/(1 - h)\big)$ (6A.11)
Merger-arb implied probability	$p = [P_T(1 + rT) - c - F]/(D - F)$ (6A.12)
Merger-arb payoff	$\min(S, D) = D - (D - S)^+$ (6A.13)
Rock IPO price	$P = \dfrac{\pi\alpha_gV_g + (1-\pi)\alpha_bV_b}{\pi\alpha_g + (1-\pi)\alpha_b}$ (6A.14)
Pledge trigger	$P^* = cL/n$ (6A.15)
Residual income	$V_0 = B_0 + \sum_t (\text{ROE}_t - k)B_{t-1}/(1+k)^t$ (6A.16)
Bank P/B	$(\text{ROE} - g)/(k - g)$ ; two-stage (6A.18)
ROE tree	$\text{ROE} = (\text{NIM} + \text{fees} - \text{opex} - \text{CC})(1-\tau)\,A/B$ (6A.19)
Net NPA	$\text{GNPA}(1 - \text{PCR})/(1 - \text{GNPA}\cdot\text{PCR})$ (6A.20)
Spread leverage	$\Delta e/e = [p/(p - c)]\,\Delta p/p$ (6A.21)
Cyclical P/E	$V/E_t = 1/[k(1 + As_t)]$ (6A.22)
Constant currency	$1 + g_\$ = (1 + g_{cc})(1 + \sum_j w_jx_j)$ (6A.23)
Sort premium	$\mathbb E[r^{LS}] = 2.318\,\mathbb E[\lambda]$ for 30/70 sorts (6A.24)
BAB	$(r_L - r_f)/\beta_L - (r_H - r_f)/\beta_H$ , beta 0 (6A.25)