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

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  • Nazreen Parveen Ali
  • Ashit Saha

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.

Suggested Citation

  • Nazreen Parveen Ali & Ashit Saha, 2021. "Market Efficiency of Indian Capital Market: An Event Study Around the Announcement of Results of Lok Sabha Election 2019," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(1), pages 60-70, January.
    • Handle: RePEc:jfr:ijfr11:v:12:y:2021:i:1:p:60-70
    DOI: 10.5430/ijfr.v12n1p60
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    References listed on IDEAS

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    1. Roshaiza Taha, 2013. "Stock Market And Tax Revenue Collection In Malaysia: Evidence From Cointegration And Causality Tests," Accounting & Taxation, The Institute for Business and Finance Research, vol. 5(1), pages 29-39.
    2. A.E. Osuala & U.A. Onoh & G.U. Nwansi, 2018. "Presidential Election Results and Stock Market Performance: Evidence From Nigeria," Applied Economics and Finance, Redfame publishing, vol. 5(2), pages 117-124, March.
    3. Thomas Downs & Patric H. Hendershott, 1986. "Tax Policy and Stock Prices," NBER Working Papers 2094, National Bureau of Economic Research, Inc.
    4. IRSHAD Hira, 2017. "Relationship Among Political Instability, Stock Market Returns And Stock Market Volatility," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 12(2), pages 70-99, August.
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