Announcement Effects on Stock Returns

Abstract

Purpose: The present work elaborates the concept of announcement of corporate events and their impact on stock returns. The magnitude of changeover in returns may vary from the relevance of any information which goes public. The expectations of investors play a vital role and if some event arises in the market whether it is company specific or change in any macro variable, there may be spill over effects. The study has discussed various such type of events and their probable impact on returns.

Design/Methodology/Approach: The previous literature related to events studied like bonus issue, stock split, merger and acquisitions etc have been reviewed and their excerpts have been used to infer the overall findings from different perspectives.

Findings: The major objective of all the studies undertaken in the area of events was to find out the presence/absence of random walk in the stock prices. Event study methodology has been majorly used by all authors for studying the impact of various events. Using CAPM, Market model, GARCH, OLS to name a few significant changes have been observed in abnormal returns.

Proposed Implications: The study provides an insight over changing efficiency forms in markets in India as well as abroad which can be tested with suitable statistical approaches.

Originality/Value: The events have been studied from various outlooks by many researchers. However, the area still has scope for further finding out the changing paradigm of stock price behaviour vis a vis events.