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Unanticipated Political Events and Stock Returns: An Event Study

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  • Jeetendra Dangol

    ()
    (Tribhuvan University)

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    Abstract

    The study focuses on market reaction to announcements of new unanticipated political events using the event analysis methodology. The findings of the study provide a consistent conclusion regarding the existence of information content hypothesis in the Nepalese stock market. The study reveals that good-news (bad- news) political announcements generate positive (negative) abnormal returns in the post-event period. The data present important evidence on the speed of adjustment of stock prices to new political in formation, i.e., in as many as 2 to 3 days from the announcement date. Thus, this paper finds that the Nepalese stock market is inefficient at a semi-strong level, but there is a strong linkage between political uncertainty and common stock returns.

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    File URL: http://www.nrb.org.np/ecorev/pdffiles/vol20_art7.pdf
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    Bibliographic Info

    Article provided by Nepal Rastra Bank, Research Department in its journal NRB Economic Review.

    Volume (Year): 20 (2008)
    Issue (Month): (April)
    Pages: 86-110

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    Handle: RePEc:nrb:journl:v:20:y:2008:p:86-110

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    Web page: http://www.nrb.org.np/ecorev/
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