An Exploratory Analysis of Factors Influencing Initial Market Response and Media Reports following Shock Corporate Events


  • This article has benefited greatly from thoughtful and constructive input from the Editor, Robert Van Ness, and an anonymous reviewer; and from discussions with many colleagues especially participants at research seminars at the University of Melbourne, the University of New South Wales and VU University in Amsterdam. I also acknowledge the hospitality of VU University's Department of Public Administration & Organization Science during 2008. The usual caveat applies.

Corresponding author: The University of Melbourne, Department of Finance, 198 Berkeley Street, Carlton, 3010, Victoria, Australia; Phone: +613 8344 3696; Fax: +613 8344 6914; E-mail:


This article examines market efficiency in a natural environment using minute-by-minute share prices following fatal industrial disasters and sudden CEO deaths, and their subsequent media reports. Prices of affected firms start to react within an hour of shock events and fall by 3%; half this fall is reversed prior to the first media reports with the balance reversed by the next trading day. Spreads behave in similar fashion. This is interpreted as market overreaction as risk-averse investors respond to uncertainty created by the shock; prices return to pre-shock levels once it is clear that the event is to be expected and already built into valuations.