Catastrophic events, contagion, and stock market efficiency: the case of the space shuttle challenger

Laurence E. Blose, Robin Bornkamp, Marci Brier, Kendis Brown and Jerry Frederick

Review of Financial Economics, 1996, vol. 5, issue 2, 117-129

Abstract: This study examines the stock returns experienced by NASA contractors associated with the Space Shuttle Challenger explosion. Because of the extensive public interest in the explosion and the intensive and stirring news coverage, this event is a candidate for an irrational market response such as a selloff, a panic, or a contagion effect. The market evidence shows that on the day of the explosion, there was a significantly negative average abnormal return on the stock of NASA contractors. Any contagion effect was limited to a very narrow set of NASA contractors who received more than 5% of their 1995 revenues from NASA. Furthermore, the market was able to identify within days after the event that the single firm most likely to be affected by the event was Morton Thiokol Corporation.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:5:y:1996:i:2:p:117-129

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