Airline deregulation and the impact on stock prices of major surviving carriers

This paper examines the effects of deregulation on stock price movements for the major surviving carriers in the airline industry. Linear transfer function model building procedures are used to define the dynamic relationships between price changes in the market and price changes in airline stocks. Analysis confirms that stock price changes in the airline industry are less sensitive to price changes in the market following the industry deregulation of 1978. The importance of the joint estimation of transfer function parameters and outlier effects is also illustrated.