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Stock Market Reaction To Nuclear Reactor Failures

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  • GEOFFREY S. ROTHWELL

Abstract

Current proposals to reform regulation of the commercial nuclear power industry ignore the potential of financial market sanctions on poor reactor management. This paper examines investor reaction to the automatic shutdowns following equipment failures at nuclear power plants from 1978 to 1985. Compared with a portfolio of nuclear utilities, the daily return to common equity of the owner of a failed reactor dropped by 0.24 percent after two trading days but increased by 0.24 percent four trading days later. Investors are averse to reactor failures but correct initial negative responses once they learn that the reactor is not damaged. Copyright 1989 Western Economic Association International.

Suggested Citation

  • Geoffrey S. Rothwell, 1989. "Stock Market Reaction To Nuclear Reactor Failures," Contemporary Economic Policy, Western Economic Association International, vol. 7(3), pages 96-106, July.
  • Handle: RePEc:bla:coecpo:v:7:y:1989:i:3:p:96-106
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.1989.tb00571.x
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    References listed on IDEAS

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    1. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
    2. Hill, Joanne & Schneeweis, Thomas, 1983. " The Effect of Three Mile Island on Electric Utility Stock Prices: A Note," Journal of Finance, American Finance Association, vol. 38(4), pages 1285-1292, September.
    3. Bowen, Robert M. & Castanias, Richard P. & Daley, Lane A., 1983. "Intra-Industry Effects of the Accident at Three Mile Island," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(01), pages 87-111, March.
    4. Dubin, Jeffrey A. & Rothwell, Geoffrey S., 1989. "Risk and reactor safety systems adoption," Journal of Econometrics, Elsevier, vol. 42(2), pages 201-218, October.
    5. Schwert, G William, 1981. "Using Financial Data to Measure Effects of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 121-158, April.
    6. Barrett, W Brian & Heuson, Andrea J & Kolb, Robert W, 1986. " The Effect of Three Mile Island on Utility Bond Risk Premia: A Note," Journal of Finance, American Finance Association, vol. 41(1), pages 255-261, March.
    7. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
    8. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
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    Cited by:

    1. Stephen Farber, 1991. "Nuclear Power, Systematic Risk, And The Cost Of Capital," Contemporary Economic Policy, Western Economic Association International, vol. 9(1), pages 73-82, January.
    2. Fink, Jason D. & Fink, Kristin E., 2013. "Hurricane forecast revisions and petroleum refiner equity returns," Energy Economics, Elsevier, vol. 38(C), pages 1-11.

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