The stock market rumours and stock prices: a test of price pressure and size effect in an emerging market

Abstract

The purpose of this study is to investigate the effects of stock market rumours/gossips on the prices of stocks traded at the Istanbul Stock Exchange with respect to price pressure and size effect. While positive significant abnormal returns are observed in days prior to the publication date, negative insignificant abnormal returns are detected in post-publication period. The view that the price movement is due to the price pressure created by the column itself is not supported. Furthermore, the smaller firms appears to be more speculative and negative returns in post publication period is more pronounced. The findings in pre-publication period refute the strong form of market efficiency while the findings in post-publication period suggest that investment decisions based on the published rumours would not benefit investors.

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