Empirical Analysis On The Speed Of Stock Price Adjustment To Firm Specific And Market Wide Announcements
EMPIRICAL ANALYSIS ON THE SPEED OF STOCK PRICE ADJUSTMENT TO FIRM SPECIFIC AND MARKET WIDE ANNOUNCEMENTS:
EVIDENCE FROM MALAYSIAN STOCK MARKET
Audrey Lim 1and Jothee Sinnakkannu2
Faculty of Business and Accountancy, INTI International University College,71800 Nilai, Negeri Sembilan
Abstract
This study aims to identify the speed of share price adjustment to publicly available information, thus to measure the relative efficiency of stocks listed in the main board of Bursa Malaysia. This study also aims to improve and extend other market efficiency research in emerging market using the Theobald and Yallup’s (2001, 2002) ratios of auto covariance and the ARMA processes. Four different empirical analyses of speeds of share price adjustment coefficients are analyzed. The number of days taken for the share prices to fully adjust (i.e. π =1) by all selected announcements, by all Firm Specific announcements, by all selected market wide announcements and by different announcement types The findings confirms that different type of announcement have different speed of price adjustment. The speeds of price adjustment in number of days vary from seven to five days of over or under-reactions for firm specific announcements while the market-wide announcements are absorbed into the prices within one to two days..
Key words: Speed of Price adjustment, Over reaction, Under reaction.
1 Lecturer in Economics and Finance, Inti College Malaysia
2 Senior Lecturer in Finance, Inti College Malaysia
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