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Do airlines always suffer from crashes?

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  • Ho, Jerry C.
  • Qiu, Mei
  • Tang, Xiaojun

Abstract

We examine the impact of aviation disasters on the stock prices of the crash airlines and their rival airlines. Results show that the crash airlines experience deeper negative abnormal returns as the degree of fatality increases. The stock prices of the rival airlines also suffer in large-scale disasters but benefit from the disasters when the fatality is minor.

Suggested Citation

  • Ho, Jerry C. & Qiu, Mei & Tang, Xiaojun, 2013. "Do airlines always suffer from crashes?," Economics Letters, Elsevier, vol. 118(1), pages 113-117.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:113-117
    DOI: 10.1016/j.econlet.2012.09.031
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    References listed on IDEAS

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    1. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
    2. Bosch, Jean-Claude & Eckard, E Woodrow & Singal, Vijay, 1998. "The Competitive Impact of Air Crashes: Stock Market Evidence," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 503-519, October.
    3. Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-935, December.
    4. Mitchell, Mark L & Maloney, Michael T, 1989. "Crisis in the Cockpit? The Role of Market Forces in Promoting Air Travel Safety," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 329-355, October.
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    More about this item

    Keywords

    Air crashes; Stock market; Contagion effect; Switch effect; Event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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