The Adjustment of security prices to the release of stock dividend/rights offering information
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This study investiga.tes market adjustment to the release of stock dividend/rights offering information for the stocks listed in IMKB First market for the period 1986-1989. The adjustment of security prices is analyzed in the context of a market model which takes market related factors into account. Direction and speed of adjustment are measured through residual analysis. Weekly security returns are regressed against returns in the market to find average and cumulative residuals around the event date. The regression model and beta coefficients are found to be significant. The results indicate that the adjustment process is slow and positive cumulative average abnormal returns are observed after the event date. This leads to the rejection of market efficiency in semi strong sense and possibility of an above normal profit.
KeywordsSemi strong form market efficiency
Average abnormal returns
Cumulative average abnormal returns