News that Moves the Stock Market: Assessing the Impact Generated by News on the Norwegian Stock Market

Olav Christoffersen & Erik Beutelspacher

Student thesis: Master thesis

Abstract

This thesis examines whether investment strategies can be constructed in order to capitalise on the market’s reaction to various kind of news, on the Oslo Stock Exchange. The research is conducted as a quantitative deductive study of stock price fluctuations at the OBX-index, in the timeframe of 01.01.2017 until 01.01.2020. The stock price fluctuations are analysed with regards to various kind of news affecting the companies, in the short – and long-run. The main focus is to consider the effects on abnormal return – and cumulative abnormal return, for the individual stocks. The implications drawn from these analyses serve as a foundation for further construction of investment strategies. The short-term effect is analysed through calculations of cumulative abnormal returns in different short-run timeframes, depending on the characteristics of the relevant investor. These calculations are used in order to construct investment strategies, based on the timeframe used in the calculation. The empirical findings imply that statistically significant investment strategies can be constructed in order to obtain a significant amount of abnormal return, dependent on the type of news. However, the abnormal return seems to be obtainable, even though the stock is not in possession of the investor, at the event date. The long-term effects on abnormal returns, originating from the news are analysed through the use of two different analytical approaches, Jensen’s alpha approach and the BHAR-approach These analyses seem not to yield statistical significance, although long-term investment strategies are formed based on market patterns and trends. The specifics of the different investment strategies depend on the type of news, although there seem to exist possibilities for obtainable abnormal returns in a 12 – and a 24-month timeframe. The empirical findings in this thesis are seen to be of financial importance and relevance, as financial markets are especially prone to uncertainty and outside shocks. Implications from this thesis can, therefore, be of relevancy for investors to obtain valuable market insight. This thesis also serves as informational content on how to obtain an abnormal return, when it exists a significant amount of uncertainty in the global economy, as well as the financial market.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages179
SupervisorsPoul F. Kjær