Hurricane Katrina's Effect on Oil Companies Stock Prices

Document Type

Article

Publication Date

2008

Abstract

This study tests efficient market theory by examining the effect of Hurricane Katrina on oil companies' stock prices. It follows that oil firms with significant investment interests in Katrina's path should incur negative stock price returns in some time frame. This event study analyzed 15 firms with interests in the Gulf of Mexico and examines the effect of Hurricane Katrina on stock price's risk adjusted rate of return before and after August 30, 2005. Results show stock returns dropping significantly prior to Hurricane Katrina reaching land. These results support semi-strong market efficiency, reflecting that the market rapidly anticipated the devastation of Hurricane Katrina. Appropriate statistical tests for significance conducted in this study show that Hurricane Katrina had a significant impact on the risk adjusted rate of return on selected oil company stock prices over the event study period.

Original Citation

Weiderman, I., Bacon, F. W. (2008). Hurricane Katrina’s effect on oil companies’ stock prices. Academy of Strategic Management Journal, 7(Special), 11-16. http://www.alliedacademies.org/Public/Journals/JournalDetails.aspx?jid=13

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