Analysis of Stock Market Reactions to Corporate Announcements: An Event Study Approach

Authors: Thirumala M

Country: India

Full-text Research PDF File:   View   |   Download

Abstract: This study investigates the stock market's reaction to the Reliance Jio-Facebook partnership announcement made on April 22, 2020, using an event study methodology. The objective is to measure abnormal returns (AR) and cumulative abnormal returns (CAR) over a 20-day event window to assess how this high-profile corporate partnership influenced stock prices. The methodology utilized the Market Model to estimate expected returns and determine abnormal returns by comparing actual stock returns with predicted returns based on the Nifty 50 Index. The results indicate significant positive abnormal returns on the announcement day (AR = 1.01%) and the following day (AR = 0.88%), reflecting investor optimism. The CAR values peaked at 1.63%, suggesting a lasting positive market impact. The findings align with the Efficient Market Hypothesis (EMH), demonstrating that the market quickly assimilated the news. This research contributes to existing literature by addressing gaps in understanding the Indian stock market’s reaction to strategic partnerships, particularly in the digital sector. The study’s implications are important for investors seeking profitable opportunities in fast-growing industries, and for policymakers focusing on improving corporate transparency and market efficiency.

Keywords: Event study, stock market reactions, corporate announcements, abnormal returns, Reliance Jio-Facebook partnership, Indian stock market

Paper Id: 231401

Published On: 2024-10-20

Published In: Volume 12, Issue 5, September-October 2024

Cite This: Analysis of Stock Market Reactions to Corporate Announcements: An Event Study Approach - Thirumala M - IJIRMPS Volume 12, Issue 5, September-October 2024.

Share this