The Financial Market Effects of International Aviation Disasters

33 Pages Posted: 2 Apr 2020

See all articles by Erdinc Akyildirim

Erdinc Akyildirim

ETH Zürich - Department of Mathematics

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Marina Efthymiou

Dublin City University

Cathal Guiomard

DCU Business School, Dublin, Ireland

John F. O'Connell

affiliation not provided to SSRN

Ahmet Sensoy

Borsa Istanbul

Date Written: March 8, 2020

Abstract

The spread of misinformation with regards to aviation disasters continues to be a point of concern for aviation companies. Much of this information usually surrounds speculation based on the cause and responsibility attributed to the incident, implicitly possessing the potential to generate significant financial market price volatility. In this paper, we investigate a number of stylised facts relating to the effects of airline disasters on aviation stocks, while considering contagion effects, information flows and the sources of price discovery within the broad sector. Results indicate a substantially elevated levels of share price volatility in the aftermath of aviation disasters, while cumulative abnormal returns present sharp under performance of the analysed companies relative to international exchanges. When considering an EGARCH analysis, we observe that share price volatility appears to be significantly influenced by the scale of the disaster in terms of the fatalities generated. Significant contagion effects upon the broad aviation index along with substantial changes in traditional price discovery channels are also identified. The role that the spread of information on social media, whether it be correct or of malicious origins, cannot be eliminated as an explanatory factor of these changing dynamics over time and region.

Keywords: Airline Disaster; Contagion; Volatility; Reputation Risk; Financial Markets

Suggested Citation

Akyildirim, Erdinc and Corbet, Shaen and Efthymiou, Marina and Guiomard, Cathal and O'Connell, John F. and Sensoy, Ahmet, The Financial Market Effects of International Aviation Disasters (March 8, 2020). Available at SSRN: https://ssrn.com/abstract=3550845 or http://dx.doi.org/10.2139/ssrn.3550845

Erdinc Akyildirim

ETH Zürich - Department of Mathematics ( email )

ETH Zentrum HG-F 42.1
Raemistr. 101
CH-8092 Zurich, 8092
Switzerland

Shaen Corbet (Contact Author)

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Marina Efthymiou

Dublin City University ( email )

Ireland 9
Dublin 9, leinster 9
Ireland

Cathal Guiomard

DCU Business School, Dublin, Ireland ( email )

Dublin 9
Ireland

John F. O'Connell

affiliation not provided to SSRN

Ahmet Sensoy

Borsa Istanbul ( email )

Reşitpaşa mh.
Tuncay Artun cd.
Istanbul, 34467
Turkey

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