An Analysis of the Stock Market's Response to the Exxon Valdez Disaster

Anthony F. Herbst, John F. Marshall and John R. Wingender

This paper examines the effect of the Exxon Valdez crude oil tanker disaster on Exxon common stock shares and those of other large petroleum companies. Price and volatility effects are both analyzed. The question is addressed of whether the stock market overreacted following the tanker spill, given the information available at the time. Also, because of the remote location of the disaster site, the reaction of the market over the days following it is scrutinized to see how the market reacted to the incremental information received as journalists arrived at the scene and made their reports, and as the assessment of the damage by state and federal agencies progressed. In addition to the normal event study methodology, we use the Garman-Klass (1980) volatility measure appropriate to NYSE stock data.