Investigation of investment announcement effect on stock returns in energy industry

Stock returns of companies are influenced by several factors. These factors are widely investigated. It is essential for investors and portfolio managers to determine these factors, which affect stock returns. In most of the previous studies, the effect of various information on stock returns has been examined by using event study methodology. Investment announcements are among the information sources that have a potential to impact stock returns. Firms' capital expenditures are strategic decisions that impact firm value. The aim of this study is to investigate whether investment announcements affect stock returns in the energy industry. In this study, we employ event study method. Event study is a method that measures the response of stock returns to specific events or announcements. A total of 7 companies that make investment announcements between 2005 and 2015 were included in the sample. For each announcement; the +/- 5 trading days and +/- 10 trading days are used as event window and 244 days prior to the event window is used as the estimation window. Abnormal returns and t-statistics are calculated to evaluate the events.The findings suggest that the investment announcements of the energy companies created significant abnormal returns in Borsa İstanbul. Consistent with the previous studies, stock prices seem to increase prior to investment announcements. Result simply that Borsa Istanbul is not semi-strongly efficient.