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Regulatory Uncertainty and the Volatility of Regional Electricity Company Share Prices: The Economic Consequences of Professor Littlechild
Author(s) -
Robinson T. A.,
Taylor Mark P.
Publication year - 1998
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00049
Subject(s) - volatility (finance) , economics , electricity , econometrics , conditional variance , variance (accounting) , stock (firearms) , autoregressive model , autoregressive conditional heteroskedasticity , financial economics , accounting , engineering , mechanical engineering , electrical engineering
This paper attempts to measure the effects of regulatory intervention by measuring the conditional variance of stock price changes in the 12 UK regional electricity companies before and after an unexpected intervention by the electricity regulator in March 1995. The analysis uses an ARCH model in which the conditional variance follows an autoregressive formation. The results indicate a significant increase in the volatility of the conditional variance for eight of the 12 companies.