Effects of foreign disasters on the petroleum industry in Japan: A financial market perspective

In this paper, we examine how certain foreign disasters—the September 11 terrorist attacks, Iraq War, and Hurricane Katrina—affected the stock prices of the Japanese petroleum industry. Using the market model with and without heteroskedasticity, we analyze and estimate the extent to which these disasters impacted the stock prices from two perspectives: (1) the influence of these disastrous incidents on the entire petroleum industry and (2) the effect on individual firms. The empirical results reveal that an increase in the stock prices of individual firms caused an increase in the stock prices of the entire Japanese petroleum industry after the September 11 terrorist attacks. However, the Iraq War and Hurricane Katrina had both negative and positive influences on the expected profits of individual firms and did not have a significant effect on the stock prices of the Japanese petroleum industry.