An Empirical Analysis of Banking Sector Reaction to Financial News Announcement during Pandemic Driven Crises

Author(s) : Ankit Verma, Anu Bagri
ISSN : 0974 - 497
Year : February 2021 | Volume : 15 | Issue : 1/4

Abstract:
All new material information with regards to the company reflects in the movement of prices of the securities. However, the speed at which this movement in prices appears and the prices of the securities reach their intrinsic level depends upon the efficiency of the capital market. The market is said to be efficient to a piece of given information if no investor can make an abnormal profit. With the increased momentum of investments into markets during the pandemic, greater importance is being given to the understanding of the market efficiency which a market inhibits.

This paper tests the semi-strong form of market efficiency by evaluating the announcement impact of finance and banking related public announcements made during the pandemic time on the NIFTY Bank Index. Total 8 events have been identified for analysis and the Nifty bank Index has taken as a proxy to examine the announcement impact on the banking sector. Using the standard event study methodology, the paper investigates the market reaction to monetary policy and stimulus package announcements for the period Jan 2020-Dec 2020. Abnormal return and Cumulative abnormal return calculated for pre 30 days and post 30 days were analyzed in the paper for being statistically significant using t-test. A paired sample t-test has been applied to test the significant difference in abnormal return between pre-event and post-event window. The results of the AARs and CAARs indicate that investors would be able to earn abnormal returns by analyzing the event and by selling the stocks traded in NIFTY Bank Index after the events were made public. Therefore, we can conclude that NIFTY Bank Index is not efficient in the semi-strong form.


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