How Does The Stock Market Typically Respond To Petrochemical Disasters?

cumulative abnormal returns

Two French economists who recently published a study on stock market reactions to petrochemical disasters have offered some interesting predictions for the BP shares.

Their post at VoxEU says you should pay attention to things like the number of deaths:

Our results show that, on average, shareholders suffer a significant loss of about 1.3% over the two days immediately following disasters. Multivariate regression analysis finds that losses in the first days are strongly related to the seriousness of the accident. [Each] fatality or serious injury is associated with an additional loss of $164 million, while the occurrence of a toxic release corresponds to an additional drop of around $1 billion. We also observe that stock market losses are more severe for firms that have bad environmental and safety records.

Gunther Capelle-Blancard and Marie-Aude Laguna don’t say exactly when the drop will end, though you can find more tips at VoxEU.

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