Seasonal Analysis of Abnormal Returns after Quarterly Earnings Announcements

Abstract

This study examines whether the Indian stock market is efficient in semi-strong form and seasonality exists. For this purpose, we take the first and fourth quarters’ results of companies for the years 2008 to 2011. We divide companies into good news and bad news portfolios on the basis of percentage changes in net profits and net sales. We use event study methodology. The results reveal that average abnormal returns occur randomly and cumulative average abnormal returns are significant for both portfolios. Fourth quarter results give better positive signals to the market than first quarter results. We conclude that seasonality exists in the Indian stock market and it is also semi-strong form inefficient and investors can use this opportunity to buy and earn abnormal profit.