Dividend Signalling And Market Efficiency In Emerging Economy: A Study of Indian Stock Market

Abstract

This paper applies GARCH (p, q) model and non-parametric Run test for studying isolated events of dividend change announcements covering a period of ten years for capturing abnormal returns in the Indian Stock Market using an event window of 61 days. The results indicate that there is no signalling effect of ‘dividend increase/decrease along with financial results announcement’ event on the share price of companies. Cumulative abnormal return tendency is observed if share purchase is made prior to any of the events. It is also found that adjustment in prices after event date takes place with a substantial time lag reflecting inefficiencies in the market.