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The Relationship between Event Studies Approach and the Future Reaction of Stocks Prices An Applied Study in the Saudi Market Stocks

Journal of Administrative and Economics Science

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Title The Relationship between Event Studies Approach and the Future Reaction of Stocks Prices An Applied Study in the Saudi Market Stocks
 
Creator El Ebaishi, Dr. Mohamed Ben Abd allah
 
Description This research aims to measure the relationship between event studies approach and the futurereaction of stocks prices, this research depends on three hypothesises:1. “There is a strong relationship between the issued information about a certain event and thefuture prices of stocks”.2. “There is a strong relationship between the market efficiency and the events which effect thefuture prices of stocks”.3. “We can measure the reaction of the future prices of stocks towards the event by measuring thepositive or negative abnormal returns”.To achieve the purpose of the research and to test its hypothesises the researcher review 19previous studies about event studies and how to use it in measuring the reaction of stocks prices in thestrong form of market efficiency, in the semi – strong form of market efficiency and in weak form ofmarket efficiency.The applied study was completed on 52 corporations which their stocks alternate in the SaudiMarket to determine the events of these companies during the period from January 1, 2006 to June 30,2008 which were 107 events, 72 of them were financial transactions and 35 of them were non- financialtransactions. The financial transactions divided into 5 groups, the event of announcing cash dividends, theevent of announcing stock dividends, the event of announcing stock splits, the event of announcing theissuing of financial statements and the event of announcing the increase in capital. The non- financialtransactions divided into 2 groups, the event of announcing the change in board of directors and the eventof alternative informal news in the market.The researcher determined the stocks closed prices in the day of occurred each event through twoevent windows (-1, +1), (-10, +10), and calculated the forecasting prices by using the auto – regressiveintegrated moving average (ARIMA) to measure the actual return, the expected return and to determinethe cumulative abnormal return and use the sample (Z) to analysis the results of every window and toillustrate its effect in the Saudi Market. The statistics results emphasize the correct of the threehypothesises.
 
Publisher Qassim University Academic Publishing and translation
 
Contributor —
 
Date 2008-05-04
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://publications.qu.edu.sa/ojs/index.php/economic/article/view/135
 
Source Journal Of Administrative And Economics Science; Vol 3, No 1
 
Language eng
 
Relation http://publications.qu.edu.sa/ojs/index.php/economic/article/view/135/132