# Event Study of Stock Splits

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EVENT STUDY OF STOCK SPLITS
Final Project Report of
Investment Banking & Financial Services (IBFS)
February 2016
Submitted to:
Prof. A.K. Mishra
Submitted by:
Group 3, Section A DHEERAJ MADAAN(Mob- +91 7523849812) | PGP30193 | HARI SINGH CHOUDHARY | PGP30198 | RITIN KAKKAR | PGP30390 | ROHAN SARAF | PGP30219 | SAKSHI SONI | PGP30392 | | |

Indian Institute of Management, Lucknow

Contents Data 3 Sample 3 Methodology 4 Alpha and Beta Estimation 4 Event Study 4 Hypothesis & Objective 5 Testing & Results 5 Alpha and Beta calculation 5 Event Study 6 Stock Split 7 Reverse Stock Split 8 Conclusion 8

Data 1. This study includes samples of 19 companies that made a stock split announcements and 9 companies that made a reverse stock split announcements. All the companies were listed on BSE. 2. Data for daily stock prices and closing BSE 500 index for this study was collected from http://finance.yahoo.com/.
Sample
The below tables show the sample companies selected for the event study. Companies selected for stock Split announcements

Companies selected for reverse stock split announcements

Methodology
The event period was decided as -60 to 60 with the announcement date falling on day 0.
Alpha and Beta Estimation 1. Alpha and beta was estimated for each company by regressing daily stock returns with index return. 2. The estimation was a done for a 250 day period prior to -60. This period was selected to minimize any noise that could arise due to the announcement of stock split/reverse stock split. 3. Actual return was calculated for all the companies as well as for the BSE 500 during the 250 day period. Actual return was obtained from the following formula:
Daily Return = (current day adj close price – previous day adj close price) / prev. Day adj close price 4....

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