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A Study on Impact of Company Specific NEWS on Investor’s Decision in India
Ph.D. Synopsis
Submitted
To
Gujarat Technological University
For
The Degree
Of
Doctor of Philosophy in Management
By
Divyang J. Joshi
Enrolment No: 119997392012
Regi. No: 8053 (Management)
Dr. P.G.K. Murthy
Supervisor
Dean (Doctoral Program), Faculty of
Management Studies, Parul University.
Dean (Faculty of Management), Gujarat
Technological University
e-mail: [email protected]
M:+91 9998036240
Dr. Zan Oplotnik
Co-Supervisor
University of Maribor - Faculty of
Economics and Business
e-mail: [email protected]
2
TABLE OF CONTENTS
Sr.
No. Description
Page
No.
Abstract 3
1. Brief description on the state of the art of the research topic - (Review of
Literature) 3 - 6
2. Definition of the problem
2.1 Research Questions 6 - 7
3.
Objective and Scope of work
3.1 Objectives of the study
3.2 Scope of the Study
3.3 Hypothesis of the Study
7
4. Original Contribution by the thesis 8
5.
Methodology of Research, Results and Summary
5.1 Population & Universe of the study
5.2 Sample of the study
5.3 Tools to be used
5.4 Concept of variables in the study
5.5 Statistical techniques used
5.6 Data Analysis of the study
5.7 Summary of Analysis
5.8 Limitations of the study
8-15
6. Achievements with respect to objectives 15
8. Chapterisation Plan 15
9. Details of Paper Publication/Presentation arising from the thesis 15-16
10. References
10.1 Web-References 17-22
Annexure
Stepwise calculation to measure the impact of news on investors’ decisions
Impact of news on Investors’ decisions – Research Process
Impact of news on Investors’ decisions and stock price
23-25
3
A Study on Impact of Company Specific News on Investors’ Decisions
Abstract
The current status of Indian stock market reflects the Indian Government’s effective and
transparent policies in mobilising the capital from savers and investors. The rotation of funds
induces the growth of the stock market by attracting the investors to a great extent in India.
In 2015 National Securities Depository Ltd (NSDL)1 had over 15 million D-mate accounts
whereas Central Depository Services (India) Ltd (CDSL)2, 11 million D-mate accounts. It has
drawn the attention of researchers, fund houses, financial planners, regulatory authorities,
stock market analysts and academicians to study the investors’ behaviour. In today’s world
the investors may collect the relevant information from the different websites, business news
channels, E-papers, news papers, twitter, blogs and E-trading terminals for the investment
decisions. It is observed that the different kinds of news have different impact on the stock
prices significantly. At the global level, India has contributed a few research studies to
understand the investors’ psychology with respect to the news announcement with the help of
event analysis and sentiment analysis considering the single kind of event like bonus share,
right share, mergers and acquisitions, earning announcements, etc. The purpose of this study
is to find out the impact of company specific NEWS on investors’ decision considering the
Business News, Earning News and Management News of the BSE 30 Sensex based
companies.
Brief description on the state of the art of the research topic
The researchers get acquainted with the writing style, theoretical basis, original ideas, rational
objectives, relationship between the variables/concepts, research methodology and statistical
tools applied in the research to refine, refocus and modify the contents of research. The
literature review carried out for the current study has been classified into major seven heads
viz. Theory of Efficient Market, Media use for getting Information, Impact of Global and
Economic News, Impact of Political News, Impact of Company Specific News, Impact of
Analysts’ Recommendations and Content Analysis.
The Efficient Market Hypothesis (EMH) assumed that the investors can not earn an abnormal
return with the help of historical information (Weak-form of EMH), public information (Semi-
strong form of EMH) and private/insider information (strong-from of EMH). Solnik (1973),
Srinivasan (1997), Abrosimova, Dissanaike and Linowski (2002), Moustafa (2004), Dhar and
Chhaochharia (2008) and Taylan & Emre (2014) concluded that it is not possible to earn an
abnormal return supporting the EMH. But, Bodie, Kane, Marcus and Mohanty (2006) found
that the investors process the information differently based on their knowledge, experience
4
and risk taking propensity which is reflected in either over-reaction or under-reaction to the
stock price movement in terms of an abnormal return in short run. The research of Ball and
Brown (1968), Rozeff and Kinney (1976), Rendleman, Jones, and Latané (1982), Bernard and
Thomas (1990), Kent (1996), Kim and Verrecchia (1997), Campbell and Shiller (1998), Pandey
(2003), P. Srinivasan (2010) and Akbar and Baig (2010) also had the evidence challenging the
EMH to conclude the possibility of abnormal return in short term. Thus, the investors take
time to adjust with the new information which offers the opportunity to earn an abnormal
return. Keeping this reality, we have adopted short time event window of 5 days to study the
impact of company specific news on investors’ decisions.
Though the relationship between the news and the stock prices broadly accepted, the
information sources affect the quality and speed of information. Sawalqa (2012) studied the
importance of different sources of corporate financial information in investment decision
based on the usage of corporate annual report, stockbrokers’ advice, published daily share
price, discussion with company staff, newspapers and magazines, Advice of friends, tips and
rumors, and corporate web sites by the investors. The findings revealed that there is
significant positive relationship between good investment opportunity and the usage of the
corporate reports. The Investors were surveyed and allowed to select more than one
information source as being of most value and Zogby (2009) found in the survey that the US
investors mainly depend on the experts and professionals (54%) followed by the
knowledgeable family, friends and colleagues (35%), the financial news website (32%) and
financial print media (14%).
The relationship of the global economic factors like the payroll employment, CPI, PPI,
industrial production, durable goods orders, trade balance, initial unemployment claims,
NAPM index, retail sales, consumer confidence, advance GDP, etc., with the stock market
indicators had been studied by Li Li and Zuliu (1998), Anderson, Francis and Vega (2001),
Adams, McQueen, and Wood (2004) and Thomas (2009). They observed the impact of the
economic indicators on the stock indices significantly in short duration only.
Bailey, Warren and Chung (1995), Merwe and Smit (1997), Tzachi Zach (2003), Amihud and
Wohl (2003), Chen, Bin and Chen (2005) and Kongprajya (2010) not only found higher impact
of political news before and during the election but also observed different reaction pattern of
individual investors and institutional investors to the political news.
The impact of company specific news of the events analysed by Tribikait and Vasconcelos
(2002), Vieru, Perttunen and Schadewitz (2004), Thirumalvalavan and Sunitha (2006), Gupta
and Kundu (2006), Madhuri Malhotra, M. Thenmozhi, G Arun Kumar (2007), Faizal (2007),
5
Soon Yu Chiang (2010), Sprenger and Welpe (2011) and Engelberg and Parsons (2011) leads to
the following observations.
1. Dividend, profit, new investment decisions, appointment of new company
administration and insider trading show positive effect on company’s stock indices.
Investors and analysts tend to perceive other news like further issue of stocks,
leverage decisions negative or less effective for the further investments decisions.
2. The earnings news triggers trading in every trading class. The active traders are found
to be well informed and their buying and selling increase with positive and negative
news.
3. The tone/sentiment in the published media has an impact on the index movement. The
index trended positively with less volatility when the tone is less negative in the
published financial news.
4. The good news generates abnormal return on and before the event announcement in
short run only as the prices is adjusted in long term.
5. Developed and developing nations recorded the different price reactions toward the
news announcement. Developed nations react closure to the public announcement
while developing nations, before 30 days of the announcement.
Stickel (1995), Womack (1996), Juergens (1999), Desai, Liang and Singh (2000), Panchenko
(2007), Gleichmann and Stattin (2011) and Michael and Thomas (2014) found abnormal return
on the days of recommendations given by the researchers, brokers and the analysts. The
higher volatility is observed for the buying rather than selling recommendations and the
recommendations of the Wall Street Journal (WSJ) outperformed their industry counterparts.
Gyozo Gidofalvi (2001), Fung, Yu and Lu (2005), Davis, Piger and Sedor, (2006), Robertson,
Geva and Wolff (2006),Tetlock (2007), Henry (2007), Schumaker, Zhang and Huang (2008),
Chiang (2010),Adrian Wai Kong Cheung (2011), Michael Siering (2012) and Majdalany and
Henderson (2013) had applied the sentiment analysis to study the reaction of the investors to
the news announcement. The findings are as follows.
1. Positive news with surprises leads to uptrend in the stock prices compared to normal
positive news.
2. Intense negative sentiments lead to decline in stock prices.
3. The price direction at the negative news may be predicted better than the positive
news.
4. The stock return predictions may be improved by text mining and sentiment analysis.
6
The majority of the literature is concerned with the speed of absorption of information into
prices. All event studies introduced so far have not covered the relative impact of the
company specific news. The sentiment analysis through content analysis is emerging tool to
measure the impact of company specific news of the business, earning and management
categories on the efficiency of the Indian stock market.
Definition of the Problem
The majority of the research regarding the Indian stock market are found in the area of
functioning of Indian Stock Market, Valuation of Bonds, Convertible Debentures and Market
for Debt, New Issue Market and Merchant Banking, Market Efficiency, Dividends, Bonus &
Rights Issues and Rates of Return, Performance and Regulation of Mutual Funds. Thomas
and Shah (2002), Verma and Agrawal (2005), Gupta and Kundu (2006), Thirumalvalvan and
Sunitha (2006), Malhotra Madhuri (2007), Dhar and Chhochariya (2008), Akbar and Baig
(2010), Kongprajya (2010), etc, had measured the impact of company specific news but had
not considered the pattern of the investors’ decisions and sentiment analysis. The study
undertaken intends to verify the earning of abnormal returns having the linkages between the
affected sentiments of investors due to company specific news which is in contrast to semi-
strong form of EMH theory. The impact of historical financial news on stock prices assists in
predicting the stock price movement and the investor behaviour. The scope of the majority of
the research studies conducted in India is limited to the specific events like bonus, split,
dividend and earning announcement ignoring sentiment analysis. Therefore, the researcher
decided to deal with the impact of company specific news on Indian investors’ decision
through the business, earning and management related announcements of BSE 30 stocks for
the period of 2011 to 2015.
Research Questions:
The following questions are attempted to analyse by the researcher to do the study on the
impact of company specific news on Investors’ decisions
1. Is there any impact of news on the investors’ decisions?
2. Is the magnitude of the impact of positive or negative news different on year to year
basis?
3. Is the magnitude of the impact of similar news (Business/Earning/ Management) same
for all the sectors in study?
4. Is there any behavioural pattern, overreaction or underreaction, for the positive and
negative news?
5. Is the sentiment analysis helpful in predicting the trend of the stock prices?
7
6. Is buying at positive news and selling at negative news inducing abnormal return?
Objectives and Scope of work
The objective of the study is to measure the impact of company specific news on investors’
decisions.
Sub- Objectives considering the sentiment analysis are as follows.
1. To study the impact of company specific news on Investors’ decisions.
2. To study the impact of earning related news on investors’ decisions.
3. To study the impact of business related news on investors’ decisions.
4. To study the impact of management related news on investors’ decisions.
5. To study the impact of positive and negative news on investors’ decisions.
6. To study the impact of earning related, business related and management related
news on the sector specific stocks.
Scope: Study is restricted to impact of company’s specific investors’ decisions for a period of
5 years from 2011 to 2015 in respect of shares listed on Bombay Stock Exchange and
forming part of SENSEX as on 26th Dec 2015.
Hypotheses of the Study
The hypothesis is the statement framed by the researcher to verify. The hypotheses of the
study to measure the impact of company specific news on Investors’ decisions considering
the sentiment analysis are as follows.
H1: There is statistically no significant impact of news on investors’ decisions
H2: There is statistically no significant impact of earning related news on Investors’
decisions
H3: There is statistically no significant impact of business related news on Investors’
decisions
H4: There is statistically no significant impact of management related news on Investors’
decisions
H5: There is statistically no significant difference between the impact of positive and
negative news on Investors’ decisions
H6: There is statistically no significant difference among the impact of positive news on
investors’ decisions
H7: There is statistically no significant difference among the impact of negative news on
investors’ decisions
H8: There is statistically no significant difference in the price reaction between the pre and
post news announcements
8
Original contribution by the thesis
Numerous research studies are carried out to understand the investors’ psychology with the
help of event analysis. But, only a few research studies carried out in India focused on the
impact of company specific NEWS on investors’ decisions with the application of sentiment
analysis. The sentiment of the news items will help in increasing accuracy in predicting the
impact of news. The findings would be significant to the fund managers, regulatory
authorities, researchers, analysts, individual investors and academicians. The study has
indirectly addressed an issue of the efficiency of the Indian stock market with respect to the
company specific news.
Methodology of Research, Results / Comparisons
The study has been undertaken to measure the impact of company specific news on Investors’
decisions considering the sentiment analysis. It intends to study the investors’ decision
patterns at the time of the announcement of company specific news viz business, earning and
management related news. If investors find the positive news, they will buy the stocks and
prices will go up whereas if they find the negative news, they will sell the stocks and prices
will go down. After classifying the news as positive or negative with the help of sentiment
analysis, the event study has been carried out to measure the impact of news on the stock
prices. The stock price movement for the positive and negative news have been compared to
analyse the impact of news on the investors’ behaviour.
The news announcement date has been taken as the event day. The estimation window of 252
days and 5 days event window (-2, 0, +2) have been considered to measure the impact of
news on the stock price movement. To avoid the overlapping and compounding effect, the
news has not been analyzed if more than one news found flashed on the event day and within
9 days of duration. The abnormal returns have been calculated to find the excess return
around the event date. The concept of abnormal returns assumes that information is absorbed
by the current market price.
Population of the study
Stocks listed in BSE as on 26/12/2015 considered as the population of the stocks to be
studied. Total 4331 equity stocks are listed and active on BSE3 and 1569 equity stocks are
listed on NSE4 . All shares listed on NSE are also on BSE.
9
Group wise Listed companies on BSE
Group Listed Companies on BSE Group Listed Companies on BSE
A 300 XC 186
B 1403 XD 993
IP 21 XT 918
M 128 Z 45
MT 13 ZT 9
P 206 Total Shares Listed
4331 T 109
Sample of the study
The oxford dictionary defined the sample as “A portion drawn from a population, the study of
which is intended to lead to statistical estimates of the attributes of the whole population”8.
For the study purpose total 30 Sensex based stocks as on 26-12-2015 were considered. The
purposive sampling technique has been used for the sampling. The Sensex contributes more
than 90% of total volume; hence it is the representative of the Indian equity market. The news
of 30 stocks of BSE has been collected from the www.moneycontrol.com from 1st January
2011 to 31st December 2015. The moneycontrol.com provides the news under the different
categories like business, management interviews, earning, stock advice, research reports and
sector. The news classified under Earning News, Business News and Management News
together 9,738 news have been considered for the undertaken study. The details of the
collected news are as below.
Category and Types of News
Category of news Types of News
Earning Announcement Quarterly and annual earnings announcements and
corrections, dividend announcement.
Management Interviews Interviews of the representative regarding company.
Business Related Changes in government policy, in global scenario, in research
and development, production, and marketing activities which
impact business of the company.
Year/ Category wise News
Types of News\ Year 2011 2012 2013 2014 2015 Total News
Business Specific 1536 1309 1553 1086 1289 6773
Earning Specific 409 441 421 355 303 1929
Management Specific 230 189 249 194 174 1036
Total News 2175 1939 2223 1635 1766 9738
10
Tools to be used
The first step is to calculate the sentiment of the news. ‘Bag-of-Words’ method has
been applied to calculate the positive and negative sentiment of the news. The Bag-of-Words
compares the news’ text with the provided list of positive and negative words. But it ignores
the sentence, phrases and understanding of language. The list of words has been downloaded
from Harvard website10.
The event study has been applied to measure the impact of news on the stock prices.
The event study is an empirical study performed on a security that has experienced a
significant catalyst occurrence, and has subsequently changed dramatically in value as a
result of it. The event can have either a positive or negative effect on the value of the
security9. The news has been classified under headings of ‘Business News’, ‘Earning News’
and ‘Management News’. A 5-day window, comprising 2 days prior the event (t= -2), event
day (t=0) and the 2 days period after the event day (t=2), has been considered to capture the
impact of firm-specific news on the investors’ decisions. 2 days before the event include all
pre event sentiments and 2 days after post event avoid the problems associated with news
reporting delays (Ryan & Taffler (2002)).
B E M Total B E M Total B E M Total
1 ADANI PORT 44 37 7 88 35 35 7 77 9 2 0 11 88%
2 ASIAN PAINT 26 60 1 87 22 25 1 48 4 35 0 39 55%
3 AXIS BANK 95 25 18 138 59 20 17 96 36 5 1 42 70%
4 BAJAJ AUTO 242 118 73 433 112 40 55 207 130 78 18 226 48%
5 BHARTIAIRTEL 758 119 63 940 187 35 46 268 571 84 17 672 29%
6 BHEL 151 83 61 295 83 41 48 172 68 42 13 123 58%
7 CIPLA 101 71 30 202 56 32 25 113 45 39 5 89 56%
8 COAL INDIA 549 86 111 746
9 Dr. REDDY 112 35 5 152 74 31 5 110 38 4 0 42 72%
10 GAIL 86 35 10 131 61 33 9 103 25 2 1 28 79%
11 HDFC 59 35 3 97 47 32 3 82 12 3 0 15 85%
12 HDFC BANK 219 73 40 332 91 37 25 153 128 36 15 179 46%
13 HERO MOTOCORP 254 132 45 431 132 39 40 211 122 93 5 220 49%
14 HUL 106 93 12 211 71 40 11 122 35 53 1 89 58%
15 ICICI BANK 108 36 9 153 77 33 8 118 31 3 1 35 77%
16 Infosys 363 127 84 574 147 56 60 263 216 71 24 311 46%
17 ITC 130 121 7 258 81 41 7 129 49 80 0 129 50%
18 L&T 254 36 18 308 121 33 17 171 133 3 1 137 56%
19 LUPIN 102 34 4 140 71 34 3 108 31 0 1 32 77%
20 M&M 563 122 59 744 167 52 44 263 396 70 15 481 35%
21 MARUTI 239 33 6 278 119 31 6 156 120 2 0 122 56%
22 NTPC 191 35 20 246 107 35 17 159 84 0 3 87 65%
23 ONGC 695 83 99 877 169 33 62 264 526 50 37 613 30%
24 RELIANCE 204 61 51 316 86 34 35 155 118 27 16 161 49%
25 SBI 285 24 27 336 140 23 24 187 145 1 3 149 56%
26 SUN PHARMA 61 24 58 143 43 20 42 105 18 4 16 38 73%
27 TATA MOTORS 253 36 10 299 129 34 9 172 124 2 1 127 58%
28 TATA STEEL 217 57 29 303 102 26 27 155 115 31 2 148 51%
29 TCS 245 66 62 373 95 34 15 144 150 32 47 229 39%
30 WIPRO 61 32 14 107 50 29 12 91 11 3 2 16 85%
Total News 6773 1929 1036 9738 2734 988 680 4402 4039 941 356 5336 45%
Summary of NEWS
Sr.
NoCompany Name
Not AnalysedTotal NEWS Collectd Total Analysed NEWS
Analysed
11
Concept of variables in the study
The stock price is the true reflector of the market sentiments. Decisions to buy and sell are
derivates of investors’ the sentiments. The positive sentiments lead to buying and negative
sentiments lead to selling the stocks. The sentiments of the news, the type of the news and
the movement in Sensex 30 are the independent variables for the study. And the stock price
movement is the dependent variable.
Statistical Tools:
The statistical tools help in identifying, classifying and analysing the data set. The event
study applied to measure the impact of news is as under (Annexure 1).
The BSE Sensex 30 share Index has been used to calculate the daily market return. To avoid
the influence of extreme values, the logarithm of the daily market return was applied to
calculate market return and daily stock return.
𝑅𝑚𝑡 = ln(𝑃1
𝑃0)
Where,
P1 is the stock price/Sensex 30 on day t (today)
P0 is the stock price/Sensex 30 on day t-1 (Previous day)
𝑅𝑗𝑡 = ln(𝑃1
𝑃0)
The Abnormal return is the difference between actual return and expected return. It can be
calculated as
𝐴𝑅𝑗𝑡 = 𝑅𝑗𝑡 − 𝐸(𝑅𝑗𝑡)
The market model was used to calculate abnormal returns around the each event date. Total
252 days were considered to calculate Intercept, Slope- Beta and Error term.
𝑅𝑗𝑡 = 𝛼𝑗 + 𝛽𝑗𝑅𝑚𝑡 + 𝜀𝑗𝑡
Where,
Rjt = the actual daily return on security j at day t
αj = ordinary least squares intercept [𝐸(𝑅𝑗) − 𝛽𝐸(𝑅𝑚𝑡)]
βj = stock sensitivity to market return/The slope coefficient
εjt = the error term for security j at day t
𝐸(𝑅𝑗𝑡) = 𝛼𝑗 + 𝛽𝑗𝑅𝑚𝑡
12
To test the significance of the abnormal returns the t-test was applied. The abnormal return of
each day of event window is divided by the standard error. If the value is greater than 1.96 at
95 percent confidence level, the abnormal return is statistically significant.
𝑆𝑔𝑛𝑖𝑓𝑖𝑐𝑎𝑛𝑡𝑇𝑡𝑒𝑠𝑡 = (𝐴𝑅𝑗𝑡
𝜀𝑗𝑡)
The Cumulative Abnormal return was calculated to measure the general impact of the news.
𝐶𝐴𝑅 = ∑ 𝐴𝑅𝑘𝑖=1
In order to see if the events affect liquidity of the security, a simple paired t-test has been
used in the study. Total volume traded in the market has been taken as the proxy for liquidity
of the stock. An attempt has been made to examine if there is any statistically significant
difference in the total traded volume of the event day compared to pre-event period of 3, 7
and 15 days. The percentage change in volume is calculated for the 5 days (-2, 0, +2). To
check the % change in volume simple return equation was applied.
%𝐶ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑉𝑜𝑙𝑢𝑚𝑒 =𝑉𝑜𝑙𝐷𝑎𝑦1– 𝑉𝑜𝑙𝐷𝑎𝑦0
𝑉𝑜𝑙𝐷𝑎𝑦0
Data Analysis of the study
The abnormal returns (AR) have been studied with the t test. If the t calculated value is
greater than 1.96, then the hypothesis will be rejected and it can be concluded that the news
has significant impact on the investors’ decisions.
SIGNIFICANT BUSINESS NEWS WITHIN WINDOW
COMPBUSI -2 -1 0 1 2
YES NO YES NO YES NO YES NO YES NO
ADANI PORT 2 33 3 32 4 31 4 31 1 34
ASIAN PAINT 4 18 2 20 2 20 0 22 2 20
BAJAJ AUTO 5 107 7 105 10 102 4 108 4 108
BHEL 7 76 7 76 3 80 4 79 1 82
CIPLA 2 54 3 54 4 52 3 53 4 52
Total 20 288 22 287 23 285 15 293 12 296
SIGNIFICANT EARNING NEWS WITHIN WINDOW
COMPEARN -2 -1 0 1 2
YES NO YES NO YES NO YES NO YES NO
ADANI PORT 1 34 0 35 4 31 4 31 2 33
ASIAN PAINT 2 23 2 23 5 20 3 22 3 22
BAJAJ AUTO 1 39 4 36 4 36 4 36 1 39
BHEL 2 39 2 39 10 31 3 38 2 39
CIPLA 2 30 2 30 2 30 10 22 3 29
Total 8 165 10 163 25 148 24 149 11 162
13
SIGNIFICANT MANAGEMENT NEWS WITHIN WINDOW
COMPMGT -2 -1 0 1 2
YES NO YES NO YES NO YES NO YES NO
ADANI PORT 1 6 0 7 1 6 0 7 0 7
ASIAN PAINT 0 1 1 0 1 0 0 1 0 1
BAJAJ AUTO 3 52 2 53 3 52 3 52 3 52
BHEL 3 45 6 42 5 43 1 47 2 46
CIPLA 1 24 1 24 3 22 4 21 3 22
Total 8 128 10 126 13 123 8 128 8 128
The investors have been found reactive for the earning and business specific news. The
majority of the significant news has been observed on the event day only. The majority of the
investors’ reactions start before the event, on the event day it is observed in highest number
and after the event the impact starts to fall. The following chart of Adani Port shows that all
three kinds of news are having impact on the news announcement day. On the event day the
spurt has been observed in AR and CAR.
Based on the sentiment scores the news has been classified as positive or negative and
analyzed. The negative news reflects higher impact of the news compared to the positive
news. The investors have reacted more on negative news compared to the positive news.
COMPANY WISE POSITIVE SIGNIFICANT NEWS
COMPSENTISIGNI TOTAL NEWS BUSINESS NEWS EARNING NEWS MGT NEWS
POSI SIGNI POSI SIGNIF POSI SIGNIF POSI SIGNIF
ADANI PORT 31 12 16 6 14 6 1 0
ASIAN PAINT 33 9 16 3 16 5 1 1
BAJAJ AUTO 139 29 73 18 20 3 46 8
BHEL 91 19 61 11 9 2 21 6
CIPLA 64 19 30 6 15 7 19 6
TOTAL 358 88 196 44 74 23 88 21
Percentage Significant 25% 22% 31% 24%
14
COMPANY WISE NEGATIVE SIGNIFICANT NEWS
COMPSENTISIGNI TOTAL NEWS BUSINESS NEWS EARNING NEWS MGT NEWS
NEGAT SIGNI NEGAT SIGNIF NEGAT SIGNIF NEGAT SIGNIF
ADANI PORT 46 10 19 5 21 3 6 2
ASIAN PAINT 15 9 6 4 9 5 0 0
BAJAJ AUTO 68 19 39 8 20 9 9 2
BHEL 81 22 22 6 32 11 27 5
CIPLA 49 23 26 9 17 10 6 4
TOTAL 259 83 112 32 99 38 48 13
Percentage Significant 32% 29% 38% 27%
The impacts of news on volume of shares have been studied. The numbers of trades on the
news days have been compared with 3 days, 7 days and 15 days average trades. The highest
differences have been observed between the trades of the event day and 3 days average
trades. The earning news has shown the highest impact in 3 days followed by business news
and management news. So the news is absorbed in short duration compared to long duration.
IMPACT OF BUSINESS NEWS ON VOLUME
COMPBUSI 3Y 3N 7Y 7N 15Y 15N
ADANI PORT 16 19 17 18 21 14
ASIAN PAINT 8 14 10 12 10 12
BAJAJ AUTO 67 45 64 48 59 53
BHEL 41 42 44 39 37 46
CIPLA 25 31 22 34 23 33
Total 157 151 157 151 150 158
IMPACT OF EARNING NEWS ON VOLUME
COMPEAR 3Y 3N 7Y 7N 15Y 15N
ADANI PORT 21 14 19 16 18 17
ASIAN PAINT 16 9 17 8 18 7
BAJAJ AUTO 25 15 24 16 24 16
BHEL 29 12 29 12 29 12
CIPLA 22 10 23 9 20 12
Total 113 60 112 61 109 64
IMPACT OF MANAGEMENT NEWS ON VOULME
COMPBUSI 3Y 3N 7Y 7N 15Y 15N
ADANI PORT 2 5 2 5 3 4
ASIAN PAINT 0 1 1 0 1 0
BAJAJ AUTO 31 24 36 19 30 25
BHEL 21 27 18 30 20 28
CIPLA 12 13 13 12 13 12
Total 66 70 70 66 67 69
Summary of Analysis
The sentiment analysis is helpful in classifying the news. The investors are more reactive to
the negative news compared to positive news. The investors were observed more reactive to
the earning news followed by business and management news. The news based trading
offered an abnormal return on 1 day before the event and on the event day. So, in long term
the Indian Market support the semi-strong form of EMH.
15
Limitations of the study
1. The global news, political news, industry specific news, natural disasters, macro and
micro economic news were assumed to be constant.
2. The precise impact of events can be measured with the tick wise data compared to the
daily data.
3. The consideration of technical factors like moving averages, open interest, future
prices, FIIs turnover, DIIs turnover, advance-decline ratios, call-put ratios, analysts
‘recommendations, etc., may help in accurate prediction with the help of ANN.
4. At last, the great challenge is to predict the human behaviour.
Achievements with respect to objectives
Since the registration of Ph.D. 7 research papers have been published in national and
international journals whereas 2 Research papers, presented at International conferences. Not
only the application based software for data analysis has been developed but also the
application of Neural Network with the help of ‘R’ has been learned during the research
process.
Chapterisation Plan
The thesis is formed of 6 chapters
Chapter 1 Introduction:
Chapter 2 Literature Review:
Chapter 3 Theoretical Framework
Chapter 4 Research Design
Chapter 5 Data Analysis and Interpretation
Chapter 6 Findings, Suggestions and Conclusions
References
Annexure
16
Details of Paper Publication/Presentation arising from the thesis
1. Impact or No impact: Impact or No Impact: A study on the impact of Business NEWS on
the Investors’ Decision. (In publication at IFMR. Awaiting for the confirmation)
2. The Primacy Effect: Impact of Information’s Order on Investors’ Perception” is
published in International Journal of Research in Commerce and Management. Volume
No. 5 (2014), Issue No. 06 (June) Issn 0976-2183. Impact Factor 0.83 (2015).
3. Effect of 2013 Budget’s Announcement on Infrastructure Stocks” is published in
International Journal Of Marketing, Financial Services And Management Research.
ISSN 2277 3622. Impact Factor 3.45 (2015)
4. A Study on Stock Price Reaction of Bonus Share Announcement” is published in Asian
Journal of Research in Business Economics and Management. Issn:2249-7307(Online).
Impact Factor 4.16 (2015)
5. A Study on Retail Investors’ Behavior” is published in International Journal of
Contemporary Business Studies. Volume 3. No 6. June 2012. ISSN 2156 7506. Pp 28-
37.
6. Testing Market Efficiency of Indian Stock Market” is published in International Journal
of Scientific and Research Publication. ISSN No.2250-3153. Volume 2 Issue 6, 2012.
Impact Factor 2.07 (2014).
7. Predicting Nifty 50-Use of Advance Decline ratio” is published in Indian Journal of
Applied Research. ISSN No. 2249-555X. Impact Factor 3.19 (2015).
8. Factors Affecting Equity Investors’ Behavior” published in International Journal of
Research in Commerce and Management. ISSN 0976-2183. Volume No. 2 (2011), Issue
No. 10 (October).
17
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24
Annexure
Stepwise calculation to measure the impact of news on investors ‘decisions
Business News of Adani Port ltd was flashed on 25th March 2011. The headline was
Mundra Port to set up coal terminal at Vizag Port
Step 2: Calculate the return of stock and market with the formula
Ln (Previous price/current price)
Step 3: Calculate Intercept, Slope, standard error and R-square. The range of the data should
be of 252 days before the event day.
Intercept -0.00702 =INTERCEPT(K140:K391,L140:L391)
Slope 1.14352 =SLOPE(K140:K391,L140:L391)
Std. Error 0.103634 =STEYX(K140:K391,L140:L391)
R- Square 0.014454 =RSQ(K140:K391,L140:L391)
Step 4: Calculate Abnormal Return (AR), T- Statistic value, calculate AR is significant or not
and calculate Cumulative Abnormal Return (CAR).
If the value of T- statistic is greater than 1.96 the AR will be statistically significant.
Date Open High Low Close No. of
Trades
Positive
Count
Negative
Count
Type of
News
23-Mar-11 132.1 133.05 131.05 131.4 1329
24-Mar-11 132.45 133.25 131.75 132.5 1256
25-Mar-11 133.9 138 133.1 137.6 4440
28-Mar-11 138 139.45 136.2 137.55 1297
29-Mar-11 137.55 139.9 135.5 136.35 2113
1 22
Step- 1 Calculate the Sentiment of the News
STKRET MKTRET
-0.0019 0.0120
0.0083 0.0079
0.0378 0.0250
-0.0004 0.0068
-0.0088 0.0093
Calculation of Return
AR T-Stat Significant CAR
-0.0086 -0.0835 NO -0.0086
0.0063 0.0609 NO -0.0023
0.0162 0.1561 NO 0.0138
-0.0011 -0.0103 NO 0.0128
-0.0124 -0.1198 NO -0.0148
25
Step – 5: Calculate impact of news on volume. Compare the volume of event day with 3days,
7days and 15 days of average. E.g.
= IF (Volume on Event Day>AVERAGE(3 Days volume before the even), "3Y","3N")
If the volume on event day is greater than 3 days average volume, the output will be 3Y
otherwise 3N.
Classification of
News as
Positive,
Negative or
Neutral with
Sentiment
Analysis
Calculation of
Abnormal
Return for the
5 days event
window
Test the
significance of
Abnormal
Return with T
test
Classify the
news based on
statistical
significant
Abnormal
return
Collection of
Company
Specific News
related to
Earning,
Business and
Management
Hypothesis
under study
tested
Impact of news on Investors’ decisions – Research Process
Stock prices of
news (statistically
significant)
predicted with an
appropriate
Model
Findings
and
Conclusion
26
