What drives the market value of firms in the defense industry?

This article assesses the relative importance of different types of news in driving significant stock price changes in the defense industry. We implement a systematic event study with the 58 largest publicly listed companies in the defense industry, over the time period 1995–2005. We first identify,...

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Bibliographic Details
Published in:	Review of financial economics 2008, Vol.17 (1), p.14-32
Main Authors:	Capelle-Blancard, Gunther, Couderc, Nicolas
Format:	Article
Language:	eng
Subjects:	Abnormal returns Bids Defense industry Economics and Finance Event study Financial markets G14 G34 GARCH models Humanities and Social Sciences Information Information release L64 Market value Stock prices Studies Time-varying beta
Online Access:	Get full text
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Summary:	This article assesses the relative importance of different types of news in driving significant stock price changes in the defense industry. We implement a systematic event study with the 58 largest publicly listed companies in the defense industry, over the time period 1995–2005. We first identify, for each firm, the statistically significant abnormal returns over the time period. Then, we look for information releases likely to cause such stock price movements. Most of the key drivers in the defense industry are the same as in other industries (key role of formal earnings announcements and analysts’ recommendations) but we also identify some specific features, in particular the influence of geopolitical events and the relevance and frequency of bids and contracts on stock prices. Finally, we examine the impact of the September 11 terrorist attacks on defense firms.
ISSN:	1058-3300 1873-5924