The Impact of Public Announcements on the Stock Prices

1774 Words7 Pages
Allocating the ownership of economy’s stock capital is the primary role of capital market. In an ideal market the price would provide accurate signals for allocation of resources. Ideal market is one in which firm’s production-investment decisions and investor’s decision regarding securities will depend on the assumption that the security prices fully reflect available information at any point in time. A market in which prices always “fully reflect” available information is called efficient.1
Anamika Sharma (2009) conducted a study to investigate the impact of public announcement of open offer by testing the semi-strong form of efficiency to draw inferences on the efficiency of stock market through market-adjusted abnormal model. The results of the study support that stock market is not efficient in semi-strong form and that open offer created a substantial value for shareholders of company during the study period.2
S. Basu (1997) tested for the information content of price-earnings multiple. He tested to see whether low P/E stocks outperform stocks with high P/E ratios. If historical P/E ratios provided useful information for obtaining higher stock returns then it would be refutation of semi strong form of efficient market hypothesis. His results indicated that low P/E portfolios provided superior returns relative to the market and high P/E provided inferior returns relative to the market. The results reported in this paper indicate that P/E ratio information was not fully
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