What is Influential Observation

This chapter revisits some of the major considerations in undertaking the cross-sectional regression. The author uses the abnormal returns as the dependent variable, with the other hypotheses tested to understand the determinants of the abnormal returns. Examining the principles of setting up the models, he uses several examples and provides commentary to add additional insights. In addition, he looks at some of the common issues and problems and how they might be addressed. Next, he outlined some important diagnostic steps. Again, examples from the literature are used to illustrate important principles. Finally, the reporting of results is examined, with some conclusions drawn about the presentation of results and reporting on the use of multiple models. Together, these steps and cautions should enable researchers to draw on their experience with regression modeling in other areas and produce valuable and useful contributions using a cross-sectional regression model.