The Impact of 9/11 on Financial Risk, Volatility and Returns of Marine Firms

Anthony C Homan ()
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Anthony C Homan: US Coast Guard, 2100 Second st., SW, Washington, DC 20593, USA.

Maritime Economics & Logistics, 2006, vol. 8, issue 4, 387-401

Abstract: This paper summarises research analysing the effects of the terror attacks of 9/11 on a set of marine operator stocks listed on Nasdaq and the New York Stock Exchange.1 The paper investigates whether these events had an adverse effect on the stock market prices of marine operators and whether 9/11 resulted in a structural change in systematic risk for these companies. The paper conducted event studies using the market model to estimate the effect of 9/11 on security prices (abnormal returns) and systematic risk. The empirical evidence shows that 9/11 had an adverse impact on returns and resulted in a structural increase in systematic financial risk. These results had adverse implications for the cost of these operators in raising capital. The results also show a substantial increase in idiosyncratic risk and conditional systematic risk and that the percentage the latter risk represents of total risk more than quadrupled. These results may have had an adverse effect on market risk and liquidity. As a whole, the increased financial risks are ancillary costs of 9/11. From a policy standpoint, policies that reduce these risks could produce ancillary secondary benefits. Maritime Economics & Logistics (2006) 8, 387–401. doi:10.1057/palgrave.mel.9100165

Date: 2006
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