Abstract
The stock market is an indicator of county’s economic strength. The investor will be keen to know the effect of publically available information on the stock prices. The stock prices are quick to respond to announcements of union budgets and external major policy changes for structural reforms. The paper tests the stock prices reactions for union budget announcement by applying event study methodology. The reactions are tested using market model, Abnormal Returns (AR), Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) for 15 days prior and 15 days after the event date. Result show that CAARs are significant for most of the days in the event window. The findings of the study support the prediction that budget announcement contains information value and therefore traders can earn abnormal gain on budget announcements in Indian capital market. The future research study could offer scope to conduct similar analysis on other macro-economic events.
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