Market Efficiency of Indian Capital Market: An Event Study Around the Announcement of Results of Lok Sabha Election 2019

Nazreen Parveen Ali and Ashit Saha

International Journal of Financial Research, 2021, vol. 12, issue 1, 60-70

Abstract: Market efficiency categorizes a stock market into three sections based on the reaction of share prices to private and public information. This paper mainly deals with reactions of stock market dynamics to information in political events considering the impact of result announcement of the Lok Sabha Elections 2019 on the Indian Stock market as reflected in the behaviour of share prices. Taking BSE 100 as the proxy market, daily closing stock prices of the 30 companies listed in BSE SENSEX was used. An estimation window of 120 trading days was taken prior to the event window. The standard Market model was applied to calculate the AAR and CAAR during the event window of 21 days. Further the Augmented Dickey Fuller (ADF) Test for unit root is applied to measure the stationary of the variables and the presence of ARCH/GARCH effect is tested to understand the volatility during the study period. The Runs Test was used to test the randomness of AAR and the paired sample t test was applied to check the impact of the event on the volume of trading. Consistent negative returns were observed following the event. But the absence of volatility and the insignificant results indicated that market efficiency Indian Stock Market is in a semi strong form.

Keywords: semi strong efficiency; AAR; CAAR; ADF Test; Runs Test; ARCH/GARCH; UIH (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:12:y:2021:i:1:p:60-70

DOI: 10.5430/ijfr.v12n1p60

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