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Item Evidence of maturing of the Colombo Stock Exchange: Informational efficiency perspective(International Research Conference on Smart Computing and Systems Engineering - SCSE 2018, 2018) Upeksha, P.G.S.; Peter, S.Due to the dynamic nature of capital markets, understanding the informational efficiency of financial markets has become crucial for investors. An implication of an efficient market hypothesis is that no excess returns can be gained from available information, since it is believed that information is priced already in the stock. The objective of this study is to assess market efficiency of the Colombo Stock Exchange (CSE) in Sri Lanka, which is one of the emerging markets in the world. In order to test for weak form efficiency, stationarity of the selected time series is tested using Augmented Dickey-Fuller test. Sri Lanka stock market as a whole and the top three sectors with the highest market capitalization, exhibit random walk processes. Event study methodology is used to assess semi-strong efficiency. Preliminary analysis using both market model and GARCH model revealed that information disclosure of the selected companies has no significant impact on the returns in the CSE as a whole or on the returns of the particular sector.Item A multi-pronged approach to assess informational efficiency of the Colombo Stock Exchange.(International Research Symposium on Pure and Applied Sciences, 2017 Faculty of Science, University of Kelaniya, Sri Lanka., 2017) Upeksha, P. G. S.; Peter, S.With the dynamic nature of the capital market environment, understanding informational efficiency of financial markets has become crucial. Efficient market is one in which prices fully reflect the available information. An implication of an efficient market is that no excess returns can be made from the available information, since it has already been reflected on the current prices. Efficient markets where information can be trusted, channeled to market participants, absorbed and reflected in the stock prices, are important characteristics that global investors look for when deciding to invest, especially in the emerging markets. The objective of this study is to assess the market efficiency of the Colombo Stock Exchange (CSE), Sri Lanka, which is one of the emerging markets in the world. In the post millennium period, a number of studies that have assessed market efficiency at the CSE. However, after the end of the Sri Lankan civil war, the economy underwent dramatic change with the indices showing rapid growth and achieving new heights. Therefore, due to the difference in the sentiment and behavior of the market and investors post conflict, it would be prudent to review whether the results seen previously for weak form and semi-strong form of efficiency still holds. In order to test for weak form efficiency, existence of any correlations of share returns are evaluated. This is done by testing the autocorrelation nature of the selected time series. In order to assess semi-strong efficiency, ‘Event study’ methodology is applied. In event study, the following approaches have been used to derive the abnormal returns. Arbitrage Pricing Theory (APT) Model is a multifactor model. It permits the researchers to choose the best factors. However, it cannot explain variation in asset return in terms of a limited number of easily identifiable factors. Capital Asset Pricing Model (CAPM) accounts for systematic risk. However, it imposes an additional restriction (the intercept equals the risk-free rate) that the variance of the error will be larger than in the market model. Market Model is the vastly used and widely accepted method in short return windows in the event studies. Market Model usually outperforms CAPM. GARCH Model estimates volatility. It is a preferred method because, with asset returns volatility seems to vary during certain periods of time. It further aims to minimize errors in forecasting by accounting for errors in prior forecasting, enhancing the accuracy of ongoing predictions. Taking into consideration the context of the local stock exchange, market participation, and institutional activity, two alternative methods were identified to derive the abnormal returns, i.e. Market Model and GARCH Model. The study expects to use dividend announcements as the primary informational source, and it is expected to identify whether evidence of abnormal returns is shown after the announcement, in order to determine whether CSE is semi-strong efficient.