Semi-Strong Market Efficiency and Post-COVID Investor Reactions to Dividend Announcements: Evidence from Developed Markets

Abstract

This study examines semi-strong market efficiency in developed markets by analysing stock price reactions to dividend announcements during the post-COVID period (2021–2025). Drawing on the Efficient Market Hypothesis and behavioural finance theory, it assesses whether dividend information is rapidly incorporated into prices or whether abnormal returns persist due to underreaction or overreaction. The sample includes oil and gas and telecommunications firms listed on the New York Stock Exchange (NYSE) and Hong Kong Stock Exchange (HKSE).Using an event study methodology, abnormal returns are estimated through the market model over a (−15, +15) event window. Average abnormal returns (AAR) and cumulative average abnormal returns (CAAR) are calculated to evaluate the speed and completeness of price adjustment. Findings reveal sectoral and cross-market differences. The HKSE oil and gas sector reflects near semi-strong efficiency, while the HKSE telecommunications and NYSE oil and gas sectors show delayed adjustment. The NYSE telecommunications sector exhibits short-term overreaction followed by reversal. Overall, results support an adaptive view of market efficiency. Practically, investors may exploit short-term mispricing, and improved dividend disclosure can enhance market efficiency.

Keywords

Semi-Strong Market Efficiency; Dividend Announcements; Event Study; Abnormal Returns; Post-COVID Markets; Behavioral Finance; New York Stock Exchange (NYSE); Hong Kong Stock Exchange (HKSE).