Fly the Friendly Skynet: Reaction to a False-News Event for United Airlines

Journal of Applied Finance, Fall/Winter 2012, Volume 22, No. 2

25 Pages Posted: 16 Jul 2013 Last revised: 17 Jul 2013

See all articles by Mary Funck

Mary Funck

Sam Houston State University

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: 2012

Abstract

On September 8, 2008, a false-news event precipitates a sharp decline in United Airline’s stock price, rapidly leading to an exchange-mandated trading halt. This event allows for the empirical investigation of the effects of a false-news trading halt in an attempt to determine its effect on market quality for United Airlines as well as its industry contemporaries. Findings suggest that United Airlines’ reaction to the false- news halt is similar to documented changes in market quality surrounding informational halts; we find a significant price response and an increase in trading volume and post-halt volatility. The market reaction of other publicly traded major airlines suggests that a contagion effect exists for firms that are informationally related to organizations experiencing a firm-specific trading halt, even when the halt is prompted by a false-news shock. A muted reaction on the part of regional airlines implies that the market is able to establish the level of information relatedness based on firm characteristics and that this awareness impacts the market’s subsequent reaction.

Keywords: exchange-mandated trading halt, firm-specific trading halt, post-halt volatility

Suggested Citation

Funck, Mary and Van Ness, Bonnie F. and Van Ness, Robert A., Fly the Friendly Skynet: Reaction to a False-News Event for United Airlines (2012). Journal of Applied Finance, Fall/Winter 2012, Volume 22, No. 2, Available at SSRN: https://ssrn.com/abstract=2294034

Mary Funck

Sam Houston State University ( email )

1803 Ave I
Huntsville, TX 77341
United States

Bonnie F. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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