Chernobyl, commodities, and chaos: An examination of the reaction of commodity futures prices to evolving information

Abstract

his study presents an analysis of the impact of the Chernobyl nuclear accident T upon the domestic futures prices of commodities reportedly produced in quantity in the region of the reactor. The results of the study, which test the pricing and volatility rationality of commodity markets, strongly support the semi-strong form version of the efficient markets hypothesis since the observed price and volatility reactions are largely consistent with the evolving information content of the accident.

Cold fusion—hot metal: An analysis of the metals futures market reactions to the cold fusion announcement

“…To gauge the impact of any event on metals futures prices, a model of normal return behavior must be developed. Although a variety of approaches are employed in previous tests of futures market pricing rationality, market-adjusted technologies (that is, techniques which explicitly adjust for changes in the overall level of all futures prices due to factors such as inflation or other market-wide influences) are particularly well-suited for tests in which the event@) under study occur at identical moments in calendar time.5 In an earlierJFM study, Pruitt, Tawarangkoon, and Wei (1987) employ the market-adjusted returns technique to analyze the effects of the Chernobyl nuclear accident on the commodity futures prices of grain products reportedly produced in quantity in the region of the reactor. Although the marketadjusted returns technique does effectively adjust for changes in the overall level of futures prices due to market-wide influences such as inflation, it neglects the possibility that the prices of differing commodity items might respond with differing sensitivities to identical changes in the underlying economic fundamentals.…”

“…Test statistics for the daily abnormal returns for each metal for each event day t, and the cumulative abnormal returns over event intervals from Tl to T2, are calculated via procedures identical to those employed previously by Pruitt, Tawarangkoon, and Wei (1987) and are not reproduced here. In all cases, the test statistics are assumed distributed asymptotically unit normal (t).…”

Hedging House Price Risk in China

“…The abnormal rate of return was calculated as the real return minus the normal return. The second approach, the market adjusted model developed by Pruitt, Tawarangkoon and Wei (), is to select a bundle of commodities not affected by the event as the control group. In this article, we adopt the Dow Jones UBS Index.…”