Effect of Government Budget Announcement on Stock Returns: Evidence from Nepal Stock Exchange

Abstract

This study examines the effect of government budget announcement on stock return of selected companies listed at Nepal Stock Exchange. For this purpose, secondary data of 48 companies are used over the study period from 5th November 2018 to 30th June 2019 and analyzed using the event study methodology with an estimation period of 120 days and event window of 41 days. The market model has been used to predict expected stock returns and use of regression technique helps to find the constant parameters of the regression equation. Calculations of AAR and CAAR are done to make sense of the aggregate effect of the government budget announcement on stock returns. Student’s t-statistics of AAR and CAAR have provided the evidence that there is a positive effect of government budget announcement on stock returns of selected companies in Nepal.