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Measuring Stock Returns After the 2021 Texas Winter Storm

Article arXiv papers · Author: Sherry Hu et al.
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Summary

The study examines how a major power outage associated with the 2021 Texas winter storm affected the stock values of firms located in impacted counties. Its focus is the measurement of abnormal returns, which represent price changes beyond what a benchmark model would predict under ordinary market conditions.

It compares four benchmarks: a market-adjusted model, a market model, the Fama-French three-factor model, and that model augmented with momentum. These methods provide alternative controls for market and factor-related returns when assessing a disaster event. The supplied text describes the research question and modeling approach, but gives no sample details, estimated returns, statistical results, or comparison of model performance. Conclusions about which firms gained or lost, the size or duration of any effect, and the robustness of the findings cannot be drawn from this excerpt.

Key ideas

  • The study estimates abnormal stock returns for firms in counties affected by the 2021 Texas winter storm.
  • It uses four benchmark models to estimate expected returns in the absence of the event.
  • The benchmarks range from market-based adjustments to factor models that include momentum.
  • The excerpt provides the methodology but no empirical results or evidence about the magnitude of price effects.

Tags

EquitiesEvent-drivenStatisticsUS markets
Full text
# Stock price reaction to power outages following extreme weather events: Evidence from Texas power outage


# Stock price reaction to power outages following extreme weather events: Evidence from Texas power outage









In this study, we evaluate the effects of natural disasters on the stock (market) values of firms located in the affected counties. We are able to measure the change in stock prices of the firms affected by the 2021 Texas winter storm. To measure the abnormal return due to the storm, we use four different benchmark models: (1) the market-adjusted model, (2) the market model, (3) the Fama-French three-factor model, and (4) the Fama French plus momentum model. These statistical models in finance characterize the normal risk-return trade-off.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.