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Catastrophic events, contagion, and stock market efficiency: the case of the space shuttle challenger
Author(s) -
Blose Laurence E.,
Bornkamp Robin,
Brier Marci,
Brown Kendis,
Frederick Jerry
Publication year - 1996
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(96)90010-5
Subject(s) - event study , stock market , space shuttle , corporation , stock (firearms) , business , economics , revenue , financial economics , finance , engineering , geography , mechanical engineering , context (archaeology) , archaeology , aerospace engineering
This study examines the stock returns experienced by NASA contractors associated with the Space Shuttle Challenger explosion. Because of the extensive public interest in the explosion and the intensive and stirring news coverage, this event is a candidate for an irrational market response such as a selloff, a panic, or a contagion effect. The market evidence shows that on the day of the explosion, there was a significantly negative average abnormal return on the stock of NASA contractors. Any contagion effect was limited to a very narrow set of NASA contractors who received more than 5% of their 1995 revenues from NASA. Furthermore, the market was able to identify within days after the event that the single firm most likely to be affected by the event was Morton Thiokol Corporation.