ARIMA modeling of event induced stock price reactions in Austria

In this paper an event study is conducted to examine stock price reactions on corporate news announcements using data from the Austrian stock market. In line with several contributions on other stock markets we choose as news the very first announcements of dividend changes of Austrian companies. Abnormal returns are computed as the difference between actual returns and expected returns generated by ARIMA time series models. The results are the first on that issue for the Austrian stock market. They corroborate the findings on other markets: dividend increases are good news to the market, inducing stock prices to rise, whereas cuts in dividends lead to price decreases. Furthermore we find that the volatility of stock returns increases in case of announced dividend decreases. In addition we test the ARIMA model assumptions of abnormal returns.