How Do Investors in the Energy Sector Perceive Australian Consumer Data Right in Energy?

Abstract

We examine investors’ reaction to the announcement and legislation of consumer data right (CDR) for the energy sector in Australia. We find the following results: First, the introduction of CDR in energy has a significant negative effect on abnormal stock returns of firms in the energy sector. Second, the impact of CDR legislation event on energy sector’s abnormal return is at least twice the impact of CDR announcement event. Third, post event return drift is observed after CDR legislation event but not after CDR announcement event. Finally, investors would have gained a profit ranging from 4.26 to 9.13 percent by engaging in short selling energy stocks after the legislation of CDR. Collectively our results suggest that investors of firms in the energy sector perceive the introduction of CDR in energy as bad news. Also, investors underreacted to the legislation of CDR in energy, consistent with gradual diffusion of information hypothesis.

Keywords: Consumer data right; Energy; Legislation; Underreaction; Event study; Australia