Evidence on Changes in Time Varying Volatility around Bonus and Rights Issue Announcements

Madhuri Malhotra (madhurimalhotra@gmail.com), M. Thenmozhi (mtm@iitm.ac.in) and Arun Kumar Gopalaswamy (garun@iitm.ac.in)
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M. Thenmozhi: Indian Institute of Technology
Arun Kumar Gopalaswamy: Indian Institute of Technology

Working Papers from Madras School of Economics,Chennai,India

Abstract: The short term and long term stock price volatility changes around bonus and rights issue announcements have been examined using historical volatility estimation and time varying volatility approach. The results show that the historical volatility has increased after bonus and rights issue announcements. Volatility persistence and unconditional volatility have also increased after the bonus and rights issue announcements. The results support the finding of Medeiros and Matsumoto (2006) but are contrary to the results of Li and Engle (1998), Connoly and Stivers (2005), and Boyd et al. (2005), who report decrease in volatility following the event announcements. This evidence, extendable to any other type of issue announcement, is consistent with theories stating that volatility increases after the seasoned capital issue announcements.

Keywords: Bonus issue; rights Issue; volatility; ARCH; GARCH (1; 1); Indian stock market (search for similar items in EconPapers)
JEL-codes: D82 G14 G15 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-09
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Evidence on changes in time varying volatility around bonus and rights issue announcements (2013)
Working Paper: Evidence on Changes in Time Varying Volatility around Bonus and Rights Issue Announcements (2012)
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