Datta and Dhillon 569 accuracy with prices quoted in the Wall Street Journal (WSJ).In order to compute daily returns from bond prices,with accumulated daily coupon interest,Moody's Bond Record is used to identify the interest payment dates,coupon rates,and maturity dates for the sample of bonds.The stock and market returns are from the University of Chicago's Center for Research in Security Prices(CRSP)daily returns tape. C.Methodology 1.Bond Methodology The mean adjusted returns methodology developed in Masulis(1980)and adapted for bonds in Handjinicolaou and Kalay (1984)is used to estimate excess returns.In order to adjust for changes in term structure of interest rates,adjusted bond return (ABRn)is calculated as follows, (2) ABRin BR -TBRin, where BRi is the bond return for firm i over n days and TBRim is the return over the same period for a matching Treasury bond.3 A 31-day interval around the event is used to estimate the comparison and announcement period returns.When earnings precede dividends,the comparison period is day-29 to day-1.The comparison period is day +2 to day +30 when dividends precede earnings.This method eliminates the problem of contamination of the comparison period by the dividend announcement.The comparison period average daily return(Ricp)for firm i is then (3) Rp=[Dn(1+ABRn)】'/-1, where k is the number of returns in the comparison period.Since bond returns are a series of single and multiple day returns,they are adjusted to yield equivalent single day returns and standardized.Thus, (4) SERis (ABRin -n.Ricp)/SiVn, where SERi,is the daily standardized excess return for firm i and S;is the estimated standard deviation of the comparison period returns for firm i.4 The standardized mean excess return(SMER,)for the portfolio of bonds is then estimated over the entire 31-day period and is given by (5) SMER=∑SER/N 3Treasury bonds with the closest maturity and coupon combination are used in the analysis.First, the set of Treasury issues with the closest maturity is identified,and then the bond with the closest coupon is used for the adjustment. 4There is a potential problem of estimating the standard deviation of the comparison period return from four or five returns.However,in our sample,there are only I I such bonds