NDLI: Intra-industry effects of negative stock price surprises

Content Provider	Springer Nature Link
Author	Akhigbe, Aigbe Madura, Jeff Martin, Anna D.
Copyright Year	2014
Abstract	We find that a pronounced stock price decline of one firm yields negative valuation effects for industry rivals, on average. We test whether the impact is conditioned on a measure of default likelihood of rivals derived from the option pricing framework. The stock price contagion effects are more pronounced for rivals with the greatest default likelihood. The contagion effects are also conditioned on the degree of the surprise, characteristics of the firm experiencing the negative surprise (such as its relative size), characteristics of the rival firms (such as their similarity to the firm experiencing the negative surprise), and characteristics of the corresponding industry (such as degree of concentration). The sensitivity of industry rivals and portfolios to negative stock price surprises changes during the 2007–2008 financial crisis, which may be because stocks had already been priced to reflect pessimistic outlooks, or because the market anticipated restructuring or government intervention that could prevent the collapse of firms with the greatest default likelihood.
Starting Page	541
Ending Page	559
Page Count	19
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	45
Issue Number	3
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2014-03-14
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Negative surprise Intra-industry Default likelihood Distress Finance/Investment/Banking Accounting/Auditing Econometrics Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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