Shareholder Wealth and Trading Volume Responses to Train Wrecks

35 Pages Posted: 30 Nov 2009

See all articles by Jeffery A. Born

Jeffery A. Born

Northeastern University - Finance and Insurance Area

Date Written: November 19, 2009

Abstract

Train wrecks are random events which have the potential to cause catastrophic losses in lives and property. Information about the extent of losses becomes available slowly which can delay shareholder responses. The sub-set of train wrecks with passenger fatalities are associated with an immediate and significantly negative CAR. There is weak evidence of a delayed decline in shareholder wealth after a train wreck. No other wreck attribute (injuries, property damage, environmental damage, etc.) are systematically correlated with announcement period or subsequent returns. There is a highly significant rise in trading volume following train wrecks, which increase and remains high as long as six weeks after the wreck. This evidence is consistent with the hypothesis that bad news is incorporated slowly but efficiently into asset prices.

Keywords: train wreck, announcement effect, volume effect

JEL Classification: G14

Suggested Citation

Born, Jeffery A., Shareholder Wealth and Trading Volume Responses to Train Wrecks (November 19, 2009). Available at SSRN: https://ssrn.com/abstract=1504900 or http://dx.doi.org/10.2139/ssrn.1504900

Jeffery A. Born (Contact Author)

Northeastern University - Finance and Insurance Area ( email )

Boston, MA 02115
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
29
Abstract Views
654
PlumX Metrics