Analysis On Announcements Effect In Securities Markets

Based on event-study method, this thesis examines the different price reactions to the announcements in the segmented A-share and H-share markets. This study enriches our understanding of the particular event announcement day phenomenon in China. According to the efficient market theory, relevant information about those events will be reflected stock prices. Event studies are used to measure the impact of an economic event on firms' market value. Empirical researchers widely adopted the market model of Sharpe(1963), estimating parameters by Ordinary Least Squares(OLS) regression method. However, according to the newly developed event study method, this model's presumptions are too strong and would lead to biased estimation. Therefore, in this paper, we apply a market model with the GARCH effects adjustment, which can offer more efficient estimators.In the fourth Chapter of this thesis, we choose the 260 firms consistent of the Shangzheng180 and Shenzheng100 Indexes as our sample for the A-share market. In order to examine the impact of the earnings announcement on stock prices, we firstly test the Null hypothesis of no such kind of impact for the abnormal returns, cumulative abnormal returns and averaged cumulative abnormal returns .Secondly, we test the null hypothesis, H0, that the given event has no impact on the average abnormal returns and traded-value in the event window. According to the results from these test, we concluded that there is no impact of the earnings announcement on stock prices.In the fifth chapter of this paper, we examine the reaction of the A-share and H-share prices in segmented markets to corporate news announcements for those firms listed in both markets. News announcements include annual, semiannual and quarter earnings announcements and dividend announcements and other announcements. By measuring and analyzing abnormal returns ,cumulative abnormal returns and averaged cumulative abnormal returns ,we found that there is no significant effect around the event date for A-share, and that in H-share market, the effect around the event day in the event window is statistically significant. Then, we examined the difference of excess return and volatility between A-share markets and H-share markets by using t-test and rank test. Then, we found a causality relationship between the A-share market and the H-share market by using the Granger Causality Test. In the final section, we provide evidence suggesting that investors' trading behavior is responsible for insensitivity of A-share prices to corporate news announcements.