Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis

Ulrich Oberndorfer, Dirk Ulbricht and Janina Ketterer

No 41, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Around the turn of the year 2005/2006, the Russian freezing of natural gas exports to the Ukraine led to a European gas crisis. Using event study techniques, we first investigate whether the Russian suspension of gas deliveries, the announcement of this suspension as well as its withdrawal had an effect on unsystematic volatility of European energy stocks. Second, we measure event effects on stock returns, taking volatility (GARCH effects) and especially possible firm-specific, event-induced volatility into account. We get – at a first glance – counterintuitive results suggesting that the definite announcement of the crisis and therefore a rise of Western Europe’s energy risk tended to increase market expectations with respect to energy-related firms. In contrast, market uncertainty increased the day when Russia reopened its valves. One reason for these findings could be windfall profits of energy-related companies due to increasing resource and electricity prices. The existence of event-induced volatility at a between-firm level confirms the choice of our flexible abnormal returns methodology.

JEL-codes: G14 Q41 Q43 (search for similar items in EconPapers)
Date: 2007
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Working Paper: Lost in Transmission? Stock Market Impacts of the 2006 European Gas Crisis (2007)
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