Asymmetric price responses to stock addition to and deletion from the Athens Stock Exchange Index

2018 ◽  
Vol 44 (4) ◽  
pp. 406-423
Author(s):  
George Papachristou ◽  
Stephanos Papadamou ◽  
Eleftherios Spyromitros
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Policy Implications ◽  
Stock Index ◽  
Market Model ◽  
Investment Strategies ◽  
Content Type ◽  
Time Period ◽  
Negative Effect

Purpose The purpose of this paper is to investigate the response of investors to the announcements on the inclusion and exclusion of companies from the FTSE-ASE 20 index. Design/methodology/approach Data on the inclusion and exclusion of companies from the FTSE-ASE 20 index in the period 2000-2012 were used. The authors performed an event study analysis using a constant return model and a market model. Two different measures of aggregated abnormal returns, namely the cumulating abnormal returns and the buy-and-hold abnormal return, were used in this investigation. Findings The results suggest that the exclusion of a company from the index has a significant negative effect on stock returns. Specifically, such a stock takes more than 15 days to recover. However, for a company’s inclusion in the index, the authors observe short-lived positive reactions on stock returns. Practical implications Capital market regulators and investors should find the policy implications of this paper meaningful. Investment strategies can be implemented on the basis of the news of exclusion from the index, which can lead to higher performance for investors. As far as authorities are concerned, the decision of inclusion and exclusion to the most significant stock index in the Greek market should be carefully considered because it creates financial instability for a significant time period. Originality/value By using a battery of parametric and non-parametric econometric tests, the existence of abnormal returns of the FTSE-ASE 20 index is explored over a long time period, including the recent financial crisis.

The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rana Bayo Flees ◽  
Sulaiman Mouselli
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Content Type ◽  
Going Concern ◽  
Study Approach ◽  
Audit Opinions ◽  
The Impact ◽  
First Time

Purpose This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. Design/methodology/approach Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements. Findings The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model. Research limitations/implications The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient. Practical implications The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand. Originality/value This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

The announcement and implementation reaction to China's margin trading and short selling pilot programme

2014 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Saqib Sharif ◽  
Hamish D. Anderson ◽  
Ben R. Marshall
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Short Selling ◽  
Market Model ◽  
Short Sales ◽  
Content Type ◽  
Pilot Programme ◽  
The Impact

Purpose – The purpose of this paper is to investigate how the announcement and implementation of short sales and margin trading regulation affects Chinese stock returns and trading volume. On 31 March 2010, the Chinese regulators launched a pilot programme, allowing short sales and margin trading for 50 Shanghai Stock Exchange and 40 Shenzhen Stock Exchange stocks. Design/methodology/approach – This paper uses an event study approach to compare market model abnormal returns (ARs) of the pilot firms with two distinct matched firm samples. A volume event study is also conducted to examine abnormal trading activity surrounding the key events in the pilot stocks. Findings – Negative ARs follow both the announcement and implementation of short selling and margin trading. This suggests the negative impact of short sales dominates the positive impact of margin trading on an average. Volume also declines, which is consistent with uninformed investors’ seeking to avoid trading against informed traders. Originality/value – The paper appears to be the first to address the impact of both the announcement and implementation of short selling and margin trading rule changes on returns and liquidity using individual stock data.

Do Indian stock market sentiments impact contemporaneous returns?

2018 ◽  
Vol 7 (3) ◽  
pp. 332-346
Author(s):  
Divya Aggarwal ◽  
Pitabas Mohanty
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Temporal Dynamics ◽  
Stock Exchange ◽  
Principal Component ◽  
Stock Index ◽  
Content Type ◽  
Investor Sentiments ◽  
Indian Stock Market ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of Indian investor sentiments on contemporaneous stock returns of Bombay Stock Exchange, National Stock Exchange and various sectoral indices in India by developing a sentiment index. Design/methodology/approach The study uses principal component analysis to develop a sentiment index as a proxy for Indian stock market sentiments over a time frame from April 1996 to January 2017. It uses an exploratory approach to identify relevant proxies in building a sentiment index using indirect market measures and macro variables of Indian and US markets. Findings The study finds that there is a significant positive correlation between the sentiment index and stock index returns. Sectors which are more dependent on institutional fund flows show a significant impact of the change in sentiments on their respective sectoral indices. Research limitations/implications The study has used data at a monthly frequency. Analysing higher frequency data can explain short-term temporal dynamics between sentiments and returns better. Further studies can be done to explore whether sentiments can be used to predict stock returns. Practical implications The results imply that one can develop profitable trading strategies by investing in sectors like metals and capital goods, which are more susceptible to generate positive returns when the sentiment index is high. Originality/value The study supplements the existing literature on the impact of investor sentiments on contemporaneous stock returns in the context of a developing market. It identifies relevant proxies of investor sentiments for the Indian stock market.

A new look at the meeting clustering effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ángel Pardo ◽  
Eddie Santandreu
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Investor Attention ◽  
Content Type ◽  
Potential Link ◽  
Clustering Effect ◽  
Trading Volumes ◽  
The Relationship

PurposeThe study aims to test the existence of a meeting clustering effect in the Spanish Stock Exchange (SSE).Design/methodology/approachThis paper studies the relationship between the clustering of annual general meetings and stock returns in the SSE. A multivariate analysis is carried out in order to analyse the relationship between monthly returns and the clustering of general meetings in the SSE.FindingsThe authors show that meeting clustering exists and that some months exhibit significant and positive additional returns related to the holding of ordinary or extraordinary general meetings.Research limitations/implicationsThe authors have explored some possible explanations for the meeting clustering effect, such as a potential link with the “Halloween” effect or the presence of higher-than-normal levels of volatility, trading volumes or investor attention. However, none of these can explain the meeting clustering effect that emerges as a new anomaly in the SSE.Practical implicationsThe authors have documented significant and positive abnormal returns in some months that coincide with the holding of general meetings. Therefore, the holding of ordinary and/or extraordinary meetings in some months involves the release of relevant information for investors.Originality/valueThis study complements the financial literature because it is focused on the clustering of meetings and its effect on a stock market whose legal order is based on civil law. This fact allows us to shed new light on meeting clustering and its effect on other types of markets.

Do firms harvest from political connections during general elections? Case of Pakistan

2020 ◽  
Vol 27 (1) ◽  
pp. 258-273
Author(s):  
Ayesha Ashraf ◽  
M. Kabir Hassan ◽  
Khurram Abbas ◽  
Qamar Uz Zaman
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Share Price ◽  
Market Model ◽  
Political Connections ◽  
Content Type ◽  
Connected Group ◽  
Playing Field ◽  
General Elections ◽  
The Impact

Purpose This paper aims to examine the impact of general elections on the stock returns of the politically connected group affiliated firms of Pakistan. Design/methodology/approach This study uses the market model to assess the impact of political connections (PCs) on abnormal stock returns, before and after election events. We have used share price data of non-financial firms of Pakistan for the years 2008-2013. Findings It has been found that behavior of cumulative average abnormal returns (CAAR) is significantly different for standalone and politically connected group affiliated firms. The results reveal that CAARs of politically connected group affiliated firms have experienced less deviation as compared to stand alone firms. Therefore, it is argued that politically connected group firms may reduce the impact of political uncertainty on stock returns in comparison to stand alone firms. Practical implications This study is helpful for policy regulators of Pakistan to devise appropriate policies to maintain a level playing field for politically connected and standalone firms. Originality/value This study provides a new dimension to understand the role and association of PCs and general elections with stock markets returns.

The effectiveness of insider trading disclosure policies: US and EU comparison

2020 ◽  
Vol 18 (3) ◽  
pp. 591-614
Author(s):  
Maha Khemakhem Jardak ◽  
Hamadi Matoussi
Keyword(s):  
Corporate Governance ◽  
Event Study ◽  
Insider Trading ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Content Type ◽  
Market Abuse ◽  
Sarbanes Oxley ◽  
Disclosure Rules

Purpose The purpose of this study is to examine the effectiveness of financial market rules in protecting minorities. Design/methodology/approach The study compares two alternative disclosure rules on insider trading, namely, the market abuse directive (Directive 2004/72/EC), inspired from the United State (US) insider trading regulation enacted by the Sarbanes–Oxley act and the transparency directive enacted by the European (Directive 2004/109/EC) dealing with the crossing of the shareholding threshold. To investigate which one is more effective in signaling reserved information, and thus in reducing information asymmetry, the authors run an event study on the French context, where both regulations are adopted. The data were hand collected from the French stock exchange securities commissions during the two years following the implementation of the two regulations in 2004. The final sample consists of 363 insiders trading and 35 crossing shareholding thresholds for 10 top French firms during the period 2006-2007. Findings The results show that the French market reacts significantly to insider trading, but poorly to the crossing shareholding thresholds. Abnormal returns are greater after insider purchases than after crossing up thresholds. These findings support the superiority of the insider disclosure regulation, as it has better information content and provides better protection to minorities. Research limitations/implications The study contributes to the corporate governance literature by comparing two disclosure-trading policies. The authors conclude that regulation of disclosure of insider trading along the lines of US disclosure rules is more informative to the market and thus more relevant and important than disclosure of cross-threshold trades. Practical implications The study contributes to the corporate governance literature by comparing two disclosure-trading policies. The authors conclude that regulation of disclosure of insider trading along the lines of US disclosure rules is more informative to the market and thus more relevant and important than disclosure of cross-threshold trades. This finding can be helpful for the securities lawmakers and regulators in the process of insider trading law enforcement. Originality/value Previous researchers approached the question of insider trading focusing on the identity of insiders. In the research, the authors address the question from another perspective, namely, the crossing of thresholds. Another methodological contribution of the study is the use of a market model that incorporates GARCH (generalized autoregressive conditional heteroskedastic) effect and time-varying systematic risk parameter (β), which is recommended to tackle the classical event study problem of detecting the exact timing of the event.

scholarly journals Event Study on the Reaction of Stock Returns to Acquisition News

2017 ◽  
Vol 4 (1) ◽  
pp. 33 ◽  
Author(s):  
Fotoh Lazarus Elad ◽  
Nko Solange Bongbee
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Null Hypothesis ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Critical Value ◽  
Market Model ◽  
Test Statistics ◽  
Publicly Traded ◽  
Simple Regression

This study examines the reaction of stock returns to acquisition news. A data of 51 observations of acquiring companies with publicly traded shares on the London Stock Exchange (FTSE100) is used over a period, from July 2012 to May 2013 with an estimation period [-100, -10] and test period [-5, +5]. The market model is applied here in order to predict future stock returns and the use of the simple regression to get the parameters of the regression equation. With this a test statistics obtained on average, is significantly positive and greater than the critical value. Therefore, the event of acquisition does appear to be related significantly to the abnormal returns and the null hypothesis being rejected.

Brexit referendum and European stock markets: a sector analysis

2020 ◽  
Vol 46 (7) ◽  
pp. 913-933
Author(s):  
Dimitris Kenourgios ◽  
Evangelos Dadinakis ◽  
Ioannis Tsakalos
Keyword(s):  
Stock Returns ◽  
Stock Markets ◽  
Abnormal Returns ◽  
Political Uncertainty ◽  
Content Type ◽  
Stock Indices ◽  
Negative Effect ◽  
Global Investors ◽  
The Uk ◽  
European Stock Markets

PurposeThe purpose of this paper is to assess the reaction of European stock markets after the UK's EU membership referendum (“Brexit”) on June 23, 2016.Design/methodology/approachThe analysis focuses on asector level by using non-aggregate stock indices across EU-28, the UK and several country subsamples. An event study is performed in order to measure cumulative abnormal returns during the post-referendum announcement period.FindingsThe results indicate an unexpected small number of affected sectors across the country samples. A negative effect is observed in the financial sector across both the EU-28 and eurozone samples, whereas basic materials and health care sectors are influenced positively across the European region. Most of the sectors in the UK display a long-lasting positive effect, while the close trade relationships between the UK and selected European countries seem to partly constitute a driving force of sectors' abnormal stock returns after the referendum.Practical implicationsThe results are useful for global investors, traders and portfolio managers in terms of whether short-term gains from investment choices across sectors can be achieved during periods of increased political uncertainty and whether investors distinguished between sectors.Originality/valueThis paper extends the Brexit literature by using, for the first time, European non-aggregate stock indices. It also contributes to the sector-specific contagion studies by identifying which sectors with similar and/or different industrial composition are more prone to political uncertainty caused by the Brexit vote.

AN ANALYSIS OF ABNORMAL RETURNS ASSOCIATED WITH STOCK SPLIT

2021 ◽  
pp. 1-14
Author(s):  
JYOTI PANDEY ◽  
VINAY KANDPAL ◽  
NEERAJ NAUTIYAL
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Market Model ◽  
Stock Splits ◽  
Event Window ◽  
Stock Split ◽  
Secondary Information ◽  
The Impact

A stock split is when a company’s outstanding shares are divided into multiple shares by issuing more shares to current shareholders without eroding their stake’s value. The company typically takes these actions to increase liquidity and marketability, lower stock prices, attract new investors and so on. The purpose of this study is to examine the impact of stock splits on the stock returns during the study period. Companies listed on the Bombay Stock Exchange (BSE) and those included in the S&P BSE 500 Index are included in the stock split data. The study period covers 14 years, between 2008 and 2021. Market model event study methodology is being employed to analyze the average abnormal returns (AARs), cumulative abnormal returns (CARs) and cumulative AAR (CAARs) using an event window period consisting of 31 days ([Formula: see text]). The study is largely based on secondary information from the CMIE Prowess IQ Database and the official BSE website. The [Formula: see text]-test, mean and standard deviation were used to investigate the influence of stock split announcements on share prices and the performance of stock splits before and after the announcement. The study found that on ([Formula: see text]), ([Formula: see text]), ([Formula: see text]) and ([Formula: see text]) and on the day of the announcement ([Formula: see text]), the market reacted favorably with significant positive abnormal returns. On ([Formula: see text]) and ([Formula: see text]) days, however, there were significant negative abnormal returns. The null hypothesis is accepted as the CAR for the whole 31-day event window, which is 0.0221, with a [Formula: see text]-statistic of 1.692, which is insignificant.

Impact of Stock Splits and Rights Issue Announcements on Market Price: Evidence from India

2016 ◽  
Vol 7 (2) ◽  
Author(s):  
Babitha Rohit ◽  
Prakash Pinto ◽  
Shakila B.
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Exchange ◽  
Market Price ◽  
Abnormal Returns ◽  
Market Model ◽  
Stock Splits ◽  
Indian Stock Market ◽  
Rights Issue ◽  
The Impact

The current paper studies the impact of two events i.e stock splits and rights issue announcement on the stock returns of companies listed on the Bombay Stock Exchange. The study consists of a sample of 90 announcements for stock splits and 29 announcements for rights issue during the period 2011-2014. Market model is used to calculate the abnormal returns of securities. Positive Average Abnormal Returns were observed for the two events on the day their announcements, however they are not statistically significant. The study concludes that the Indian stock market is efficient in its semi-strong form.

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