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The Effects of Regulation and Regulatory Risk in the UK Electricity Distribution Industry
Author(s) -
Robinson T. A.,
Taylor M. P.
Publication year - 1998
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/1467-8292.00084
Subject(s) - volatility (finance) , equity (law) , electricity , business , electric power industry , stock (firearms) , event study , electricity market , electric power distribution , industrial organization , financial economics , economics , finance , mechanical engineering , paleontology , context (archaeology) , electrical engineering , political science , law , biology , engineering , physics , quantum mechanics , voltage
This paper examines the impact of regulation of the UK electricity industry on expectations of investors in the shares of regional electricity companies (RECs). This is done using event‐study methodology where the movements of RECs’ returns are compared to movements in the stock market as a whole. We then test for the presence of regulatory risk by modelling the conditional volatility of equity returns before and after 30 significant regulatory events using an ARCH process. Our results show no evidence of regulatory capture in this sector but suggest that regulatory risk does exist.