Monetary policy announcement and stock price behaviour: An event study with respect to India

Title

Monetary policy announcement and stock price behaviour: An event study with respect to India

Creator

Vinod S.; Scaria R.; Girish S.

Description

Monetary policy in a developing country plays a significant role in achieving the objectives of macroeconomic policies. The Central Bank formulates and implements the monetary policy in a country which in turn facilitates the increase in growth rate, manages interest rates, and money supply in the economy. The primary objective of this paper is to test the semi-strong form of Efficient Market Hypothesis in the Indian Stock Market with respect to financial services industry by conducting an event study. The monetary policy announcements made from 11th March 2016 to 30th August 2019 are taken as the events. The event study methodology is conducted on 13 financial service companies listed in NSE Financial Services Index. The Average Abnormal Return (AAR) and Cumulative Average Abnormal Return (CAAR) are estimated using the daily closing price of the sample companies and Nifty. Two sample T-statistics are used to find the significance of the returns generated. The t-values of a majority of AARs and CAARs are significant suggesting that there is a scope for generating abnormal return by the investors on the event of the monetary policy announcement. It is found that the investors are able to earn abnormal profits which indicate that the Indian stock market is not efficient in the semi-strong form due to the slow absorption of information. IJSTR 2020.

Source

International Journal of Scientific and Technology Research, Vol-9, No. 2, pp. 5724-5731.

Date

2020-01-01

Publisher

International Journal of Scientific and Technology Research

Subject

Average abnormal return; Cumulative average abnormal return; Efficient market hypothesis; Monetary policy; Nifty; Reserve Bank of India

Coverage

Vinod S., Christ (deemed to be) University, India; Scaria R., Christ (deemed to be) University, India; Girish S., Christ (deemed to be) University, India

Rights

Restricted Access

Relation

ISSN: 22778616

Format

Online

Language

English

Type

Article

Identifier

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85079867435&partnerID=40&md5=29ed8cf1290bf29e191e66c2a9c56c99