Market volatility of banking stock return vis-à-vis banks merger: An application of GARCH model

Abstract: The objective of this research was to investigate the effects caused by the announcement of mergers of SBI and its associate banks i.e. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travan-core (SBT) with State Bank of India on the volatility of the return of SBI stock during the event window of 300 days. In order to achieve the proposed objective, this study applied Generalized autoregressive conditional heteroscedasticity (Garch) class model to the return series to model their volatility because it is considered an important tool for time series data analysis. Our results confirmed the impact of the announcement of Merger on volatility. The results suggest that merger announcement was expected to cause a reaction in the returns, which is related to higher abnormal return in lesser time through merger announcement for investors.

How to cite this paper

 Khan, A & Zia, A. (2019). Market volatility of banking stock return vis-à-vis banks merger: An application of GARCH model.Management Science Letters , 9(5), 629-638.

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