INFORMATIONAL CONTENT OF STOCK PRICES

Abstract

This study tried to examine why some property-related news has a significant impact on the share prices of publicly-listed companies when they were first announced, while others did not. The event parameter approach was employed to test the hypothesis that if an announcement did not contain any useful unanticipated news that was relevant to the market participants, then the abnormal returns around the event date should not be significantly different from zero. The tests revealed that there were significant cumulative average abnormal returns (CAARs) two weeks before the condo actual launch date. Possible reason was that market participants has already received information that prompt them to take actions in investing once they knew that a condominium project was ready to be launched. Our findings produced several important implications, namely, stock market investors should be open and receptive to market rumours if they wish to make abnormal gains or avoid incurring abnormal losses. This is because the leakage of information may turn out to be a valid indicator way before the announcements were made. This may be due to the fact that Singapore has a small and saturated property market.