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Hotel and Travel Sector in Sri Lanka and Easter Attack 2019: An Event Study


This paper examines the impact of the Easter Attack, which took place in Sri Lanka, after the thirty-years of brutal civil war, on the Hotel and Travel Sector. As the hub of the Tourism Industry, the stock performance of the Hotel and Travel Sector is observed and investigated with the major objective of finding the impact of the Easter Attack and testing the Semi – Strong Form Efficiency of the Hotel and Travel Sector since three out of eight bombings has taken place in Hotels. The Event Study Methodology has been used to analyze the data and investigate the Efficient Market Hypothesis (EMH). With the Market Model implication, the Abnormal Returns is calculated by using daily stock prices on thirty-three (33) companies belong to Hotel and Travel Sector, and for the Market Return data, the daily All Share Price Index (ASPI) is taken into account. For 41 days Event Window, which includes 100 days Event Timeline, Graphical presentation of Average Abnormal Return (AAR) and Cumulative Average Abnormal Return (CAAR) and t - Statistics analysis is guided for analyzing the event. The findings of this study have shown a quick drop in both AAR and CAAR has been shown. It provides evidence for Semi – Strong Form efficiency on the event day in the Hotel and Travel Sector Stock prices since the market efficiently and negatively responded regarding the event of Easter Sunday Attack since the quick drop on the event day and the significant t-statistic at 5%. Nevertheless, a few days after the event were also showing significant results but declining continuously due to maybe investors’ over-reaction situation. However, Semi – Strong Form Efficiency could not be proved because it takes considerable time to adjust stock prices. In practice, investors will be able to trade stocks in a market except for the possibility of beating the market in the future.

Keywords: Easter Sunday attack 2019, efficient market hypothesis, event study methodology, hotel and travel sector, Sri Lanka