Abstract

In my thesis, I aim to examine the effect of nuclear disasters on energy futures markets. I use the crude oil and the heating oil futures contracts, which are the two most actively traded energy futures contracts, as representatives of this market. The nuclear disasters are classified into three categories, the incident-level category, which includes events rated level 1 to level 3, the accident-level category, which includes events rated level 4 to level 7 and the total category, which includes both incident-level and accident level events. In my thesis, I address the effect of all three categories of nuclear events upon both crude oil futures and heating oil futures contracts, to determine whether the nuclear events affect the energy futures market and if so, whether the impacts are related to the severity of the nuclear disasters. For both contracts, I use the market model with Generalized Autoregressive Conditional Heteroskedastic (GARCH) effects to estimate the distribution of returns in the estimation period which includes no nuclear disasters. The results show that for both contracts, the accident-level category of events are associated with statistically significant negative impacts for almost each day in the event window and post-event window. However, for the incident-level and the total category of events, the cumulative average abnormal returns are only statistically significant negative for the first 2 days following the event day and the last 10 days in the post-event window. The cumulative average abnormal returns show that only the accident-level category has a persistent impact upon the futures contracts beyond the event date. I also find that the heating oil futures contract adjusts faster to information about the nuclear disaster, since during the post-event window, the cumulative average abnormal returns revert to a zero mean.