Stock market reaction to food recalls: a GARCH application
AbstractHow food recalls due to bacterial contamination affect the stock prices of two companies are examined using a version of the financial market model that accounts for Generalized Autoregressive Conditional Heteroscedasticity (GARCH) effects. GARCH methodology was necessary to uncover the time-varying volatility in the series and it contributed to more efficient econometric results. The initial food recall undertaken by the company is associated with reduced mean returns and higher volatility of the companies studied. Repeated recalls by the same company are not associated with strong reactions. Volatility spillovers across firms suggest potential industry-wide repercussions from bacterial contamination incidents.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 9 (2002)
Issue (Month): 15 ()
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