Open AccessReaction of Stock Prices to Dividend Announcements and Market Efficiency in Pakistan
Author(s) -
Muhammad Akbar,
Humayun Habib Baig
Publication year - 2010
Publication title -
the lahore journal of economics
Language(s) - English
Resource type - Journals
eISSN - 1811-5446
pISSN - 1811-5438
DOI - 10.35536/lje.2010.v15.i1.a5
Subject(s) - dividend , stock exchange , stock (firearms) , dividend policy , economics , financial economics , dividend yield , wilcoxon signed rank test , stock market , abnormal return , monetary economics , econometrics , event study , cash , dividend payout ratio , business , finance , biology , mechanical engineering , paleontology , context (archaeology) , horse , engineering , curriculum , economic growth
This study tests the semi-strong form of market efficiency byinvestigating the reaction of stock prices to dividend announcements. Itanalyzes cash, stock, and simultaneous cash and stock dividendannouncements of 79 companies listed on the Karachi Stock Exchange fromJuly 2004 to June 2007. Abnormal returns from the market model areevaluated for statistical significance using the t-test and Wilcoxon SignedRank Test. The findings suggest negligible abnormal returns for cashdividend announcements. However, the average abnormal and cumulativeaverage abnormal returns for stock and simultaneous cash and stockdividend announcements are mostly positive and statistically significant.