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Hurricane forecast revisions and petroleum refiner equity returns

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  • Fink, Jason D.
  • Fink, Kristin E.

Abstract

We test the return reaction of an index of petroleum refining firms to the official forecast revisions for major tropical storms in the refinery-dense region of the northwest Gulf of Mexico. First, we find that improvements in official hurricane forecasts over the last twenty years have had a direct effect on when asset prices react in anticipation of tropical storms. In the 1990s, traders react to forecasts at the 24-hour horizon. A decade later they react earlier — price movements in the 2000s react to forecast information at the 48-hour horizon. Second, we find that the effect of upward revisions in storm intensity is associated with increases in the returns to our index. These increases only accrue to large firms, perhaps due to these firms' ability to utilize geographic diversification and previously idle capacity to take advantage of storm-induced increases in refined petroleum prices.

Suggested Citation

  • Fink, Jason D. & Fink, Kristin E., 2013. "Hurricane forecast revisions and petroleum refiner equity returns," Energy Economics, Elsevier, vol. 38(C), pages 1-11.
  • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:1-11
    DOI: 10.1016/j.eneco.2013.02.005
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    Cited by:

    1. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.

    More about this item

    Keywords

    Petroleum refiners; Hurricane forecasts; Asset pricing; Tropical storms;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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