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Do Managers Exhibit Loss Aversion in Their Risk Management Practices? Evidence from the Gold Mining Industry

In: Advances in Financial Risk Management

Author

Listed:
  • Tim R. Adam
  • Chitru S. Fernando
  • Evgenia Golubeva

Abstract

For years, hedging made Southwest Airlines Co. the most consistently profitable airline in the US. But included in its third-quarter earnings, released Thursday, was a $247 million accounting charge, which reflected the decline in the value of its hedges as the price of oil dropped during the quarter. The charge caused Southwest, which had a healthy operating profit, to post a quarterly net loss for the first time in 17 years. ‘Southwest is looking for opportunities to “de-hedge” some of its fuel,’ Gary Kelly, the airline’s chief executive, said Thursday. ‘Low fuel prices are a good thing … and an opportunity that we’ll want to take the best advantage of that we can.’ Wall Street Journal, ‘Fuel Hedges Cloud Airline Results,’ 17 October 2008.

Suggested Citation

  • Tim R. Adam & Chitru S. Fernando & Evgenia Golubeva, 2013. "Do Managers Exhibit Loss Aversion in Their Risk Management Practices? Evidence from the Gold Mining Industry," Palgrave Macmillan Books, in: Jonathan A. Batten & Peter MacKay & Niklas Wagner (ed.), Advances in Financial Risk Management, chapter 5, pages 105-124, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-02509-8_5
    DOI: 10.1057/9781137025098_5
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