A Study of Efficiency of the Indian Stock Market

Iqbal and T. Mallikarjunappa (2010). 'A Study of Efficiency of the Indian Stock Market', Indian Journal of Finance, Vol. 4, No. 5, pp.32-38.

Posted: 8 Jan 2020

Date Written: May 7, 2010

Abstract

In this study, we used event study methodology to examine stock price reactions to quarterly earnings announcement. The study is based on a sample of 146 companies listed on Bombay Stock Exchange and December 2000 quarterly earnings announcements are taken event. The abnormal performance is measured by using the market adjusted model, and market model. The results show that AAR and CAAR values are positive for majority of the days during the event window and the earnings announcement had a positive impact on the market. From Runs test statistics, it appears that AAR values are non-random. The Sign statistics for the mean adjusted model shows that the numbers of positive and negative AARs are different and not equal. The t-test results show that CAAR values are significant for most of the days for all the portfolios in the event window. The significant CAARs show that the investors can use buy and hold strategy to gain abnormal returns. Based on these evidences, we conclude that the Indian stock market is not efficient in the semi-strong form. The quarterly earnings announcement information can be used by the investors to earn abnormal returns in the Indian stock market.

Keywords: Efficient Market Hypothesis theory (EMH), excess return, Cumulative Average Abnormal Returns, quarterly earnings announcements, Indian stock market, Semi-strong from of EMH, Indian stock market response to earnings information

JEL Classification: G13, G14, G15, G18, C32, F30

Suggested Citation

Hawaldar, Iqbal Thonse and Mallikarjunappa, T., A Study of Efficiency of the Indian Stock Market (May 7, 2010). Iqbal and T. Mallikarjunappa (2010). 'A Study of Efficiency of the Indian Stock Market', Indian Journal of Finance, Vol. 4, No. 5, pp.32-38. . Available at SSRN: https://ssrn.com/abstract=3515454

Iqbal Thonse Hawaldar (Contact Author)

Kingdom University ( email )

Sanad
Bahrain

T. Mallikarjunappa

Mangalore University ( email )

Mangalagangotri
Mangalore - Dakshina Kannada
Mangalagangothri - 574 119, D.K. Karnataka 574199
India

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