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Fatal accidents in the mining industry – do investors react rationally?

Mattsson, Björn LU (2020) NEKH02 20192
Department of Economics
Abstract
The mining industry is characterized by a hazardous working environment for its employed blue-collar workers and a general complexity of valuation for investors. By theories of behav-ioral finance, corporate social responsibility, and others outlined in the following, this makes a setting where one could plausibly expect reactions and even overreactions among investors to fatal accidents incurred among employed miners related to the mining operations. To investigate this, an event study was performed, studying cumulative abnormal returns of the event date and its following nine days. Furthermore, a trading strategy based on the hypothesized market ab-normality was simulated and analyzed. T-tests were conducted on the initial negative... (More)
The mining industry is characterized by a hazardous working environment for its employed blue-collar workers and a general complexity of valuation for investors. By theories of behav-ioral finance, corporate social responsibility, and others outlined in the following, this makes a setting where one could plausibly expect reactions and even overreactions among investors to fatal accidents incurred among employed miners related to the mining operations. To investigate this, an event study was performed, studying cumulative abnormal returns of the event date and its following nine days. Furthermore, a trading strategy based on the hypothesized market ab-normality was simulated and analyzed. T-tests were conducted on the initial negative reactions, the rebound tendency, and the complete event window, both with winsorized and non-winsorized residuals. While the study failed to confirm the hypothesized tendencies at the 5% level of significance and the trading strategy was concluded not superior, the shape of the re-sults, when plotted, were in line with them. However, these results should be viewed and inter-preted with caution; this due to not only the test’s de facto insignificance and weakness, but also by the criticism of intentionally searching for patterns in data. (Less)
Please use this url to cite or link to this publication:
author
Mattsson, Björn LU
supervisor
organization
course
NEKH02 20192
year
type
M2 - Bachelor Degree
subject
keywords
Finance, behavioral finance, market psychology, overreaction theory, efficient market hypothesis, mining, fatal accidents
language
English
id
9009837
date added to LUP
2020-05-25 09:31:18
date last changed
2020-05-25 09:31:18
@misc{9009837,
  abstract     = {{The mining industry is characterized by a hazardous working environment for its employed blue-collar workers and a general complexity of valuation for investors. By theories of behav-ioral finance, corporate social responsibility, and others outlined in the following, this makes a setting where one could plausibly expect reactions and even overreactions among investors to fatal accidents incurred among employed miners related to the mining operations. To investigate this, an event study was performed, studying cumulative abnormal returns of the event date and its following nine days. Furthermore, a trading strategy based on the hypothesized market ab-normality was simulated and analyzed. T-tests were conducted on the initial negative reactions, the rebound tendency, and the complete event window, both with winsorized and non-winsorized residuals. While the study failed to confirm the hypothesized tendencies at the 5% level of significance and the trading strategy was concluded not superior, the shape of the re-sults, when plotted, were in line with them. However, these results should be viewed and inter-preted with caution; this due to not only the test’s de facto insignificance and weakness, but also by the criticism of intentionally searching for patterns in data.}},
  author       = {{Mattsson, Björn}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Fatal accidents in the mining industry – do investors react rationally?}},
  year         = {{2020}},
}