ABSTRACT
In a semi-strong form efficient market, the stock prices should fully, instantly and correctly reflect the public information (Fama 1970). Event studies provide a direct test of the hypothesis of semi-strong form market efficiency by examining the reaction of stock prices or returns to the announcement of firm specific events. The firm specific events, such as stock splits and dividend issues, are taken to be irrelevant to shareholders’ wealth Miller and Modigliani (1961). However, such events do convey the information on the future cash flows of the company (Peterson 1971). Current events signal the future profitability of the company, and the gains to the investors. Therefore, the announcements of events can, and frequently do, affect the stock prices and returns.
