Changes in equity returns and volatility across different Australian industries following the recent terrorist attacks

We investigate the impact of five recent terrorist attacks on equities listed on the Australian Stock Exchange. Following the Global Industry Classification Standard, we analyse how these events affect the different sectors in Australia. Using parametric and non-parametric tests, we investigate the relationship between stock returns for equities listed in these sectors and terrorist attacks. We report significant short term negative abnormal returns around the September 11 attacks and to a lesser extent, the Madrid and London bombings. Our evidence shows a weak positive equity response to the Bali bombing, and no response from the Mumbai attack in the Australian market. We also document negative industry abnormal returns as high as 37.30% on the day in the Utilities sector. Our findings show that systematic risk of certain sectors increased after the events of September 11 but remained unchanged for the other attacks.     

The influence of systematic risk factors and econometric adjustments in catastrophic event studies

Event study methodology is a well-accepted technique in finance. Although its application is popular, there have not been many critical assessments of this practice. For instance, in the estimation process, the researcher has to make a choice in terms of which asset pricing model to adopt when calculating expected returns. Different expected return models and financial econometrics adjustments may give rise to different results. This study explores seven commonly employed approaches. Using terrorist attacks and the subprime crisis as events, we calculate abnormal returns with different expected return techniques and then assess if there is a change in the result. Our evidence shows that the results vary according to the choice of the technique in estimating an expected return.     

Coalition Formation Procedures: The Impact of Issue Saliences and Consensus Estimation

Coalition formation procedures incorporate two properties that are not often found in other coalition formation models: the choice between different formation paths and constrained consensus positions. However, there are two aspects of coalition formation procedures that are often overlooked: issue saliences and consensus estimation. Issue saliences are a measure of the importance that parties can attribute to issue dimensions. Initially, we employ the classical application to implement issue saliences. The classical application combines the Euclidean distance with the center of gravity as a consensus estimate. Secondly, we introduce a consistent distance application where the coalition consensus position is determined by minimizing the sum of salience-weighted Euclidean distances. The impact of these aspects is examined with the help of both numerical and empirical applications. The results indicate that both the consensus estimation method and the inclusion of issue saliences do not only have an impact on the estimated consensus position. They also determine the individual parties’ preferences towards the potential coalition formation procedures.