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The financial market effects of international aviation disasters


Akyildirim, Erdinc; Corbet, Shaen; Efthymiou, Marina; Guiomard, Cathal; O'Connell, John F.; Sensoy, Ahmet (2020). The financial market effects of international aviation disasters. International Review of Financial Analysis, 69:101468.

Abstract

The spread of misinformation with regards to aviation disasters continues to be a point of concern for aviation companies. Much of this information usually surrounds speculation based on the cause and responsibility attributed to the incident, implicitly possessing the potential to generate significant financial market price volatility. In this paper, we investigate a number of stylised facts relating to the effects of airline disasters on aviation stocks, while considering contagion effects, information flows and the sources of price discovery within the broad sector. Results indicate a substantially elevated levels of share price volatility in the aftermath of aviation disasters, while cumulative abnormal returns present sharp under-performance of the analysed companies relative to international exchanges. When considering an EGARCH analysis, we observe that share price volatility appears to be significantly influenced by the scale of the disaster in terms of the fatalities generated. Significant contagion effects upon the broad aviation index along with substantial changes in traditional price discovery channels are also identified. The role that the spread of information on social media, whether it be correct or of malicious origins, cannot be eliminated as an explanatory factor of these changing dynamics over time and region.

Abstract

The spread of misinformation with regards to aviation disasters continues to be a point of concern for aviation companies. Much of this information usually surrounds speculation based on the cause and responsibility attributed to the incident, implicitly possessing the potential to generate significant financial market price volatility. In this paper, we investigate a number of stylised facts relating to the effects of airline disasters on aviation stocks, while considering contagion effects, information flows and the sources of price discovery within the broad sector. Results indicate a substantially elevated levels of share price volatility in the aftermath of aviation disasters, while cumulative abnormal returns present sharp under-performance of the analysed companies relative to international exchanges. When considering an EGARCH analysis, we observe that share price volatility appears to be significantly influenced by the scale of the disaster in terms of the fatalities generated. Significant contagion effects upon the broad aviation index along with substantial changes in traditional price discovery channels are also identified. The role that the spread of information on social media, whether it be correct or of malicious origins, cannot be eliminated as an explanatory factor of these changing dynamics over time and region.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Language:English
Date:May 2020
Deposited On:03 Feb 2021 08:39
Last Modified:04 Feb 2021 21:00
Publisher:Elsevier
ISSN:1057-5219
OA Status:Hybrid
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.irfa.2020.101468
Official URL:https://www.sciencedirect.com/science/article/pii/S1057521920301125
Other Identification Number:merlin-id:20609

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