Abstract
The aim of the study is to examine the semi-strong form efficiency of the Indian stock market and determine whether the market reacts to information regarding bonus issues. Bonus issues are expected to send positive signals to investors and hence prices are expected to rise when an issue is announced. If there is a significant predictable increase in price after the bonus announcement that can be used to make abnormal profits, the market is considered to be inefficient. Twenty five bonus issues between 2002 and 2007 were studied using the event study methodology and abnormal returns were calculated using the market model. Although the study showed a positive market reaction to the bonus issues, the results were not statistically significant. This shows that the Indian market is semi-strong form efficient.
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