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Stock price reaction to announcement of buy back in India: An event study of selected stocks
(Punjab Agricultural University, 2013) simardeep kaur; Gupta, Mohit
present study entitled 'Stock price reaction to announcement of buy back in India: An event study of selected stocks' aims to study the stock price reaction to buy back announcements through open market purchase and tender offer. Secondary data with respect to buy back announcement is collected from January 1st 2006 to December 31st 2012. Sample finally consisted of randomly selected 30 stocks for open market purchase and 30 stocks for tender offer. Event study methodology was applied where the event 'e' was considered as date of announcement of buy back. Stock return parameters i.e., alpha and beta co-efficients were calculated from single index market model including regression of stock returns on appropriate stock index return. The expected returns calculated on the basis of stock parameters from estimation window( e-100 to e-5) were compared with the actual returns in the event window (e-5 to e+5) and post event window (e+5 to e+30) and t test was applied to test the significance of these returns. The cumulative average abnormal return was found to be significant only in case of buy back through open market purchase in pre event window (starting from e-12 days) and extending upto post event window (upto e+6 days).