Presentation of Results

Given the nature of an efficient market, it is impossible to make abnormal returns by

trading on past trends, publicly available information or any other private information. Thus if
there is no unusual movements in the stock returns around the event, then it’s obvious that the
Cumulative abnormal returns (CAR) will be fluctuating around zero which means the Prime
minister's sworn in hold no information. If the CAR during event window fluctuates highly then
this indicates prime minster KP oli's sworn in to hold some information. The T- statistic represents
the size of difference relative to the abnormal returns during the event window. Higher the
magnitude of T, greater would be evidence suggesting abnormal returns during that period.
Similarly, P-value less than 0.05 indicates the significance of Prime ministers sworn in on the
returns of the stock indicating the traders would have gained if they have traded during event
window.
Table 1: Cumulative Abnormal Return (CAR) during event window

Stock Cumulative Abnormal T-Statistics P-Value Significance

Return (CAR)
Nabil Bank 1.50% 2.82755 0.00234 Significant

Kumari Bank Limited 4.04% 4.56162 0.00000 Significant

(KBL)
Prime Commercial 1.51% 2.2677 0.01167 Significant
Bank (PCBL)
Machhapuchre Bank -2.45% -2.8012 0.00254 Significant
Limited (MBL)
Global IME Bank 0.55% 0.70836 0.23936 Not Significant
Limited (GIBL)

NEPSE Index -0.71% -1.8963 0.02895 Significant

Interpretation of Results
The table 1 above illustrates the CAR values and t-statistic over the test period [-10, +10]
days of KP oli's sworn in. Among the five selected commercial banks, all banks except Global
IME bank's CAR are significant. As the CAR of NABIL,KBL, PCBL and MBL are significant,
this means the CAR for these stocks fluctuated highly during the event window. For NABIL, the
CAR is 1.50% meaning the NABIL unusual stock return due to prime ministers sworn in would
be 1.50%. Similarly, for KBL and PCBL, the unusual stock return due to prime ministers sworn
in would be 4.04% and 1.51%. This means the event has caused the fluctuations in the returns of
these stocks. The abnormal returns significance is not found for GIBL

Similarly, looking at the CAR for the Index return during the event time, the p-value is
found to be 0.02895 which indicates the impact of prime ministers sworn in on the stock market
as a whole is significant. Due to the event, the market return has declined by 0.71%. Therefore this
means that there is a significant Abnormal returns in stock market when the prime minster KP Olis
sworn in is made. Looking at the findings on Induvial stocks and NEPSE index, the presence of
abnormal returns is found indicating the reaction of investors to the political events like Prime
ministers sworn in.
Mean Difference of Returns (-10, +10 days)
Table 2: Difference of Average daily return before and after the event
Stock Average Return Average Return After Mean Difference
before Event Event
Nabil Bank 0.15% -0.29% 0.44%

Kumari Bank Limited -0.36% -0.20% -0.16%

Prime Commercial Bank 0.06% -0.36% 0.43%

Machhapuchre Bank Limited -0.19% -0.96% 0.77%

Global IME Bank Limited 0.19% -0.43% 0.62%

NEPSE Index -0.10% -0.69% 0.59%

 Table 2, depicts the 10 days average daily return of the stocks before and after the
occurrence of Prime minister KP oli's sworn in. The mean difference is the difference between
average return berfore and after the occurrence of event. The highest mean difference is seen on
MBL's Stock as the difference of 0.77% is found in average return before and after the event.
Similarly, GIBL, has mean difference of 0.62%. For NEPSE index return, the mean difference of
0.59% is found which indicates the fluctuations in the return after occurrence of the event. For
NABIL's Stock, the mean difference is found to be 0.44% which is followed by PCBL (0.43%)
and Kumari Bank Limited (-0.16%). The differences in the average return during the pre-event
window and post event window indicates the fluctuations in the returns which many be caused due
to multiple reasons. But the signigicant changes in return just after the sworn in of prime minister
indicates the influence of political event on stock market which can be seen in findings of Table 1
also.

Abnormal Returns for (-10, +10 days)

The figure 1-5 illustrates the abnormal return of stocks before and after the occurrence of
the sworn in. For Kumari Bank Limited, Prime Commercial Bank limited and Machapuchre Bank
limited the abnormal returns after the sworn in are highly fluctuating. This indicates the
speculations made on prime ministers appointment by shareholders and investors. Figure 6, shows
the abnormal returns on the Nepse index which shows the sharp decline in the index just after the
sworn in. This means the market has over reacted to the sworn in event causing the heavy
fluctuations. The fluctuations on abnormal returns for different stocks and Nepse index before and
after prime minster can be referred in the figures below:
Figure 1: Abnormal Returns of NABIL before and after Prime ministers sworn in

4.00% NABIL abnormal Returns 3.10%

DAILY ABNORMAL

2.45%
2.18%
1.78%
1.51% 1.36%
2.00% 1.15%
RETUNR

1.07% 1.05% 0.85% 1.08%

0.57% 0.38%
0.19%
-0.15% -0.10%
-0.44% -0.35%-0.20%
0.00% -1.14% -1.07%

-2.00%
EVENT DATE FEB 15
 Figure 2: Abnormal Returns of KBL before and after Prime ministers sworn in

KBL abnormal Returns

3.24%
4.00%
ABNORMAL RETURNS

1.69% 1.74%
1.33%
2.00% 0.56% 0.73% 0.55%
0.40% 0.44% 0.29% 0.32%
-0.21%0.06% -0.04%0.09%
-0.65%
0.00% -1.01% -1.00% -1.18%
-1.96%
-2.52%
-2.00%

-4.00%
EVENT DATE, FEB 15

Figure 3: Abnormal Returns of PCBL before and after Prime ministers sworn in

PCBL abnormal returns

2.00% 1.38% 1.52%
1.29% 1.30% 1.15%
0.95%
0.78%
AXIS TITLE

0.61% 0.76%
1.00% 0.27% 0.41%
0.48%
0.23%
0.47%
-0.11% -0.22%
-0.36% -0.32%
0.00% -0.48%
-0.72% -0.66%

-1.00%

EVENT DATE

Figure 4: Abnormal Returns of PCBL before and after Prime ministers sworn in

MBL abnormal returns

4.00% 2.81% 2.63%
1.65% 1.78% 1.73%
ABNORMAL RETURN

2.00% 0.66% 0.89% 0.81% 0.83%

-0.01% 0.19% 0.24%
-0.46% -0.16%
0.00% -0.99% -1.10%
-1.77% -2.00%
-2.84% -2.56%
-2.00%
-4.94%
-4.00%
-6.00%
EVENT DATE FEB 15

Figure 5: Abnormal Returns of PCBL before and after Prime ministers sworn in
 GIBL abnormal returns
1.49%
2.00% 1.35%
ABNORMAL RETURN

0.81%
1.00% 0.49% 0.47%0.58%0.65% 0.36% 0.29% 0.47%0.59%0.67%
0.05% 0.05% 0.24%
-0.11% -0.13% -0.20%
-0.46% -0.34%
0.00% -0.89%
-1.00%
-2.00%

EVENT DATE, FEB, 15

Figure 6: Abnormal Returns of PCBL before and after Prime ministers sworn in

NEPSE, Abnormal return

4.00% 1.93% 1.85%
ABNORMAL RETURN

1.52% 1.58%
0.94%
2.00% 0.43% 0.34% 0.31% 0.14% 0.53% 0.69%
-0.57%-0.67% -0.43% -0.44% -0.27%
-1.11% -0.88%
0.00% -1.82%-1.75%

-2.00% -3.34%

-4.00%
EVENT DATE FEB 15

Analysis: Behavior finance, EMH, Conclusion