Impact of budget announcement on stock returns: An Event Study in Pharmaceutical and Automobile sector


  • Sadia Shafiq
  • Saiqa Saddiqa Qureshi


Event study, budget announcement, efficient market hypothesis (EMH), stock returns, pharmaceutical sector, automobile sector.


This study explains the budget announcement impact on automobile and pharmaceutical sectors stock returns. We have observed whether there is any significant effect of budget announcement events in stock returns during the window period or not. It is a quantitative study and event-study methodology is adopted. The event window consists of 15 days, including seven pre-event days, one event day and seven post-event days, while the estimation window consists of 230 pre-event window days. As per knowledge of researcher, no study in Pakistan has specifically studied the budget announcement event impact on stock returns of automobile and pharmaceutical sectors by using event study methodology. This study will be beneficial for market participants of pharmaceutical and automobile sectors because of its consideration to dynamics in stock market after the budget event announcement. The findings of current study revealed that Pakistan’s stock market is found to be semi strong efficient. Volatility in returns was observed but no significant impact was found in the automobile sector while in pharmaceutical sector, significant impact was observed for two years. Results indicate that there is very low chance to earn abnormal returns as all the information related to the budget immediately absorbed by market forces.