Evidence on Changes in Time Varying Volatility Around Bonus and Rights Issue Announcements

International Journal of Emerging Markets, Forthcoming

27 Pages Posted: 22 Nov 2011

See all articles by Madhuri Malhotra

Madhuri Malhotra

UpGrad

M. Thenmozhi

Indian Institute of Technology Madras

G. ArunKumar

Indian Institute of Technology (IIT), Madras

Date Written: November 20, 2011

Abstract

The short term and long term stock price volatility changes around bonus and rights issue announcements have been examined using historical volatility estimation and time varying volatility approach. The results show that the historical volatility has increased after bonus and rights issue announcements. Volatility persistence and unconditional volatility have also increased after the bonus and rights issue announcements. The results support the finding of Medeiros and Matsumoto (2006) but are contrary to the results of Li and Engle (1998), Connoly and Stivers (2005), and Boyd et al. (2005), who report decrease in volatility following the event announcements. This evidence, extendable to any other type of issue announcement, is consistent with theories stating that volatility increases after the seasoned capital issue announcements.

Keywords: Bonus issue, rights Issue, volatility, ARCH, GARCH (1, 1), Indian stock market

JEL Classification: G14, G15, D82

Suggested Citation

Malhotra, Madhuri Satsangi and Thenmozhi, M. and ArunKumar, G., Evidence on Changes in Time Varying Volatility Around Bonus and Rights Issue Announcements (November 20, 2011). International Journal of Emerging Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1962265

M. Thenmozhi

Indian Institute of Technology Madras ( email )

Sardar Patel Road
Guindy
Chennai, TN Tamil Nadu
India

G. ArunKumar

Indian Institute of Technology (IIT), Madras ( email )

Sardar Patel Road
Guindy
Chennai, TN Tamil Nadu 600036
India

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
165
Abstract Views
1,377
Rank
325,734
PlumX Metrics