The behavior of crude oil spot and futures prices around OPEC and SPR announcements: An event study perspective

Abstract

This paper examines the informational efficiency of crude oil spot and futures markets with respect to OPEC conference and U.S. Strategic Petroleum Reserve (SPR) announcements. We employ the event study methodology to examine the abnormal returns in crude oil spot and futures markets around OPEC conference and SPR announcement dates between 1983 and 2008. Our findings regarding OPEC announcements indicate an asymmetry in that only OPEC production cut announcements yield a statistically significant impact with the impact diminishing for longer maturities. We also find that the persistence of returns following OPEC production cut announcements creates substantial excess returns to investors who take long positions on the day following the end of OPEC conferences. In the case of SPR announcements, we find that the government's use of this program initiates a short-run market reaction following the announcement date. Furthermore, our tests of cumulative abnormal returns suggest that the market reacts efficiently to SPR announcements providing support for the use of the strategic reserves as a tool to stabilize the oil market. Our findings have significant policy implications for investors and are useful in designing effective energy policy strategies.

Full text

The Behavior of Crude Oil Spot and Futures Prices around OPEC and SPR Announcements: An
Event Study Perspective
Rıza Demirer†* and Ali M. Kutan**
* Southern Illinois University Edwardsville
** Southern Illinois University Edwardsville; The Emerging Markets Group, Sir Cass Business School,
London; The William Davidson Institute, University of Michigan Business School.
† Corresponding author: Rıza Demirer. Department of Economics and Finance, Southern Illinois University Edwardsville,
School of Business, Edwardsville, IL 62026-1102. E-mail: rdemire@siue.edu; Tel: 618-650-2939; Fax: 1-618-650-3047.

The Behavior of Crude Oil Spot and Futures Prices around OPEC and SPR Announcements: An
Event Study Perspective
Abstract
This paper examines the informational efficiency of crude oil spot and futures markets with respect to
OPEC conference and U.S. Strategic Petroleum Reserve (SPR) announcements. We employ the event
study methodology to examine the abnormal returns in crude oil spot and futures markets around
OPEC conference and SPR announcement dates between 1983 and 2008. Our findings regarding
OPEC announcements indicate an asymmetry in that only OPEC production cut announcements yield
a statistically significant impact with the impact diminishing for longer maturities. We also find that
the persistence of returns following OPEC production cut announcements creates substantial excess
returns to investors who take long positions on the day following the end of OPEC conferences. In the
case of SPR announcements, we find that the government’s use of this program initiates a short-run
market reaction lasting for about a week following the announcement date. However, our tests of
abnormal returns suggest no statistically significant impact of these announcements on the oil market,
putting doubt on the efficiency of the use of the reserves as a tool to stabilize the oil market.
Keywords: Crude Oil, OPEC, Strategic Petroleum Reserves, Futures Markets, Event Study
2

1. Introduction
This paper uses the event study methodology to study the impact of two oil-related events on crude oil
market activity. The first type of event is OPEC announcements regarding production quotas. Here, we
look at three types of OPEC announcements: increase, no change, and decrease in quotas. The second
type of event is U.S. Strategic Petroleum Reserve (SPR) announcements on crude oil purchases
(releases) from (to) the market. In doing so, we contribute to the literature in several significant ways.
First, we provide evidence from both spot and futures oil markets. Previous studies (summarized
below) do not tend to cover both markets simultaneously. For the latter, we use up to 12-month
maturities to examine whether these events affect more short- or long-end of the market. This is
important for hedging and speculative strategies as informational efficiency of futures markets is
shown to improve hedging performance. Second, unlike previous work, we perform sensitivity
analysis by employing three different measures of abnormal (excess) returns estimated using the
market model, the ARCH model, and the three-factor Fama-French model. Finally, we use a rich
sample period running from1983 through 2008. This period covers important episodes in the crude oil
market history and provides more robust results based on a larger number of events considered.
There are limited published studies examining the impact of OPEC decisions on oil market activity.
Draper (1984) investigates the impact of scheduled and unscheduled (“emergency”) OPEC
announcements on different maturities in the heating oil market using weekly returns. The results
indicate significant differences in pre- and post average weekly returns for regularly scheduled
meetings, but not for unscheduled ones. Our paper is different from this study as we employ different
normal performance models to measure abnormal returns and examine the behavior of cumulative
abnormal return paths in order to test for persistence in excess returns. In addition,we focus on daily
returns, while Draper (1984) calculates weekly returns.
3

Deaves and Krinsky (1992) examine the reaction of oil futures (crude and heating oil) to OPEC
meetings during the period 1970-1990. They classify OPEC meeting outcomes into two categories
(bad and good news) depending on the sign of the abnormal returns on the day following the
announcement. Using the ARCH methodology to model normal performance, they find statistically
and economically significant excess returns following conferences that were associated with good
news. Our paper is different from this study, as we utilize three different models to estimate normal
performance and look at both spot and future returns for different maturities. In a more recent study on
the effect of OPEC meetings on oil prices, Wirl and Kujundzic (2004) find a weak impact that is at
best restricted to meetings that recommend price hikes.
Guidi, Russel and Tarbert (2006) use the event study methodology to examine the effects of OPEC
production increases and decreases on stock returns in the US and UK, as well as on oil prices. They
look at periods of conflict (i.e., Iraq war) and peace during 1986-2004 and find that OPEC production
“cut” decisions have a much bigher impact on spot oil prices than decisions to “increase”, indicating
asymmetry. Our study is different from theirs in significant aspects. First, they focus on oil spot prices,
while we also study future oil prices. Second, they employ the market model in the event study, while
we use different models to measure normal performance. In addition to “increases” or “decreases” in
quotas, we also look at “no change in production quotas” decisions as market participants may also
react to “no news”.
Another important aspect of our study is the inclusion of the events regarding U.S. SPR
announcements. The SPR Program was established in 1977 following the oil embargo of 1973 in
order to prevent the negative effects of a major petroleum supply interruption on economic activity by
having sufficient petroleum reserves. The proponents of the Program argues that the use of the reserves
in case of significant negative oil shocks may act as an effective tool to stabilize the oil market in the
U.S. and other parts of the world. However, others have argued that such stockpiling of oil by
4

governments to deal with short term restrictions on supply imposed by both OPEC or non-OPEC
nations may not be effective (e.g., Taylor and Van Doren, 2005) or that existing stocks are insufficient
to significantly influence price of oil (Considine, 2006). By examining the impact of SPR
announcements on both spot and future oil prices, we try to shed some light on this important current
debate: Is the SPR Program an effective tool to stabilize the market?
2. Data and Event Descriptions
We examine daily spot and futures prices for light sweet crude oil over the period March 1983 through
June 2008. We concentrate on crude oil contracts traded in the U.S. as the SPR program was
established with the goal of stabilizing the oil market in the U.S. Spot prices are measured by cash
prices with the anticipation that cash prices will better reflect actual transactions. In order to examine
the information content of OPEC and SPR announcements for different time horizons, we also
compiled daily NYMEX light sweet crude oil futures settlement prices for a number of maturities into
the future. More specifically, we examine the nearest contract as well as the third and twelfth closest
contracts covering a range of maturities spanning up to one year into the future. Futures return series
are constructed with contract rollover occurring about one week before maturity in most cases.
Table 1 presents several summary statistics for daily spot as well as futures returns for the different
maturities mentioned earlier. As expected, we observe the highest volatility in the spot market with
lower return volatility values as we move towards longer maturities. Observing the highest volatility in
the cash market is not surprising as these prices reflect transactions for immediate delivery of the
underlying asset and tend to be more sensitive to supply and demand changes in the market. This can
also be seen in the extreme values observed in these return series with daily spot returns ranging
between a lowest value of -40.2% and a highest value of 19.86%. High correlation values observed
between spot and futures return series indicate the common risk factors underlying the oil market.
5

In this study, we explore the information content of OPEC announcements as well as SPR
announcements. For this purpose, we examined meeting summaries from the Official Resolutions and
Press Releases published by the OPEC Secretariat and compiled a list of official announcements on
production decisions. OPEC meets twice a year on prescheduled dates for ‘ordinary’ conferences but
they also call for ‘extraordinary’ conferences with short notice. The ministerial meetings are held
occasionally to resolve operational and monitoring problems in the organization; and sometimes they
decide to change production levels. In our analysis, each official press release is considered an event.
Having compiled a list of events, we then classified each OPEC announcement in terms of a
production cut, hike and no change in production levels. As will be explained in the methodology
section, several announcements had to be omitted from the analysis due to the specifics of the event
study methodology. Overall, as reported in Table 2, a total of 63 OPEC meetings have been examined,
of which 17 resulted in a production hike, 21 in a production cut, and 25 in no change in production
levels. Similarly, U.S. government’s announcements on the use of Strategic Petroleum Reserves are
compiled from the Energy Information Administration’s website.1 During the period studied, 15 SPR
related announcements have been made, of which 11 were announcements on the release of crude oil
from the reserves to the market (SPR decrease) and 4 were on the purchase of crude oil from the
market at market prices (SPR increase). Crude oil releases from the SPR have been either in the form
of a sale or a loan to the market (mostly refineries) where purchases have been either in the form of a
direct purchase or payment by oil companies in return for federal leases. Whatever the form of oil
transfer may be, an SPR decrease announcement indicates additional oil supply to the market and an
SPR increase announcement indicates and additional purchase from the market. It is in fact a source of
heated discussions among policy makers whether it is in the best interest of consumers and taxpayers
when the government purchases large quantities of oil from the market only to create upward pressure
in prices. Furthermore, such action makes little sense when the government purchases oil at the already
1 www.eia.doe.gov
6

high market prices when it should actually be selling in order to benefit taxpayers. Therefore, it is an
interesting question both from a research as well as policy making standpoint whether SPR actions
have created the desired market reaction without hurting consumers by artificially inflating market
prices.
3. Methodology
Event study methodology is a widely used analytical tool that has been applied to a wide range of
corporate events in the empirical finance literature. The goal is to assess the information content of an
event such as a merger or an earnings announcement by examining the behavior of abnormal or excess
returns earned on the underlying security around a recurrent relevant event. A large body of literature
has been devoted to the application of this methodology to a number of firm specific and economy
wide events including stock splits, mergers and acquisitions, earnings announcements, international
listings, issues of new securities, and announcements of macro-economics variables. A discussion of
this methodology can be found in Brown and Warner (1980, 1985), Peterson (1989), Thompson
(1995), MacKinlay (1997), and Binder (1998). Although the methodology has been widely applied to
corporate events, its application to non-corporate events has been limited. As mentioned earlier,
Draper(1984) examined the behavior of heating oil futures prices around known events (scheduled
OPEC meetings) and unknown events (special meetings) and found that the market showed a slow
adjustment to information or a possible misestimate of the informational impact. In another study,
Deaves and Krinsky (1992) used the event study methodology to examine the behavior of crude and
heating oil futures prices around OPEC conferences and tested whether the market reacted to these
announcements as prescribed by the efficient market hypothesis. Their analysis of oil prices during the
1980s suggest that if investors took long positions in oil futures on the day following the end of the
conferences associated with good news, they were able to generate substantial positive returns. These
7

excess returns were found to be too high to be explained by transaction costs or risk adjustments. We
extend the analysis in these studies by investigating the events during 1990s and 2000s as well.
3.1. Oil Spot and Futures Excess (Abnormal) Returns
In this study, we use the event study methodology to assess the information content of both OPEC and
SPR announcements using a longer sample period (1983-2008), including more recent data and a
wider range of futures contracts covering a number of maturities. We also perform separate tests using
three different models to measure normal performance. At the heart of an event study is the estimation
of excess or abnormal returns defined as the difference between the actual ex post return of the
underlying asset minus the normal return defined as
)(ctctct RERRA
−
=
(1)
where Rct is the log return on crude oil on day t and E(Rct) is the normal return. In our study, each
OPEC conference or SPR press release is considered as one event. So, the subscript c indicates the
particular OPEC conference announcement or the SPR announcement that applies to the event period
over which abnormal returns are calculated. A total of 78 events have been compiled (see Table 2). As
mentioned earlier, we perform separate tests in order to examine the behavior of spot returns and three
futures return series, F1, F3, and F12 representing the nearby, third closest and twelfth closest
contracts, respectively. The normal return is defined as the expected return in non event periods
without conditioning on the event taking place. Different models have been proposed in the literature
to estimate normal performance. In this study, we use three separate models to measure normal
performance during non event periods:
1. The Market Model: The market model takes the form of standard CAPM with the commodity
index being used to proxy the return on the market. Similar to Draper (1984), we estimate the
market model as
8

ctmtccct RR
ε
β
α
+
+
=
where Rmt is the return on the Dow Jones AIG Commodity Index on day t. Dow Jones AIG
commodity index is a highly liquid and diversified benchmark for the commodities market
consisting of nineteen physical commodities and is used in the model as a proxy for the
commodities market performance. Assuming the error term, ct
ε
, has an expected value of zero,
the error term is in fact the abnormal return at t in event time in the vicinity of event c denoted
as
ctct
AR
ε
=
1.
2. The ARCH Model: Similar to Deaves and Krinsky (1992), we estimate an ARCH model of oil
returns
ctcct eR
+
=
µ
where the variance of the error term is defined as
∑
=
−
+= q
iictjccctct ee
1
2
0
2)(
δδσ
with the model estimated up to seven lags, i.e. q=7. This model provides a second estimate for
the abnormal return at t in event time in the vicinity of event c denoted as
ctct eAR
=
2.
3. The Fama-French Model: The third model we use to measure normal performance is the
multi-factor model suggested by Fama and French (1993). They suggest a three factor model
utilizing the size (SMB), book to market ratio (HML) and the risk premium on the market
portfolio as determinants of asset returns. The return model takes the form
cttctcftmtccct aHMLbSMBbRRbbR
+
+
+
−
+= 3210 )(
Based on this model, we get a third estimate for abnormal returns denoted as
ctct aAR
=
3.
9

3.2. Model Estimation and Hypothesis Testing
Assuming t=0 is the event date, the model for normal performance is estimated over the estimation
period -80 days to -21 days covering about two months prior to the event. Once the parameters for the
normal performance models are estimated and announcements (or events) categorized (see Table
abnormal returns are then calculated using equation 1 over the twenty business days prior to and
subsequent to the end of each event (announcement), i.e. -20 days to +20 days. In some cases, due to
the proximity of conferences (in particular, in the case of extraordinary meetings), several events had
to be dropped in order to prevent the event from influencing the normal performance model par
estimates. Onc
2),
ameter
e daily abnormal returns are calculated, average daily abnormal returns are then
calculated as
∑
=
n
e
sum of
to a
=
cct
tnARAR
1
/ (2)
where n is the number of events for which observations exist for a given type of event. The averag
abnormal returns are finally used to calculate cumulative average abnormal returns as the
average abnormal returns for day -20 the specified day T using the following formul
∑
=
−=
t
T
ce
t
including 5, 10, 15 and 20 days subsequent to the end of the
event. Deaves and Krinsky (1992) suggest that under the null hypothesis of market efficiency, the
expected return can be formulated as
T
tARCAR
20
(3)
In order to see whether the market reacted efficiently to these announcements, we test the significan
of cumulative average abnormal returns following the announcement date. More specifically, we tes
for possible persistence in the CAR paths following the announcement, i.e., the null hypothesis H0:
CART-CAR1 = 0 for selected T values
⎥
⎦
⎤⎡
⎦
⎤
⎣
⎡
==
TT
t
n
cctT
21
1⎢
⎣
=
⎥⎢
=− ∑∑∑ =t
t
AREnARECARCARE
2
/)(.
10

Assuming the error terms (i.e. the abnormal returns) are i.i.d. with an expected return of zero and
constant variance of σ2, the variance term is then formulated as
nTARCARCAR T
t
t
T/)1(var)var( 2
2
1
σ
−=
⎥
⎦
⎤
⎢
⎣
⎡
=− ∑
=
.
4. Empirical Findings
4.1. OPEC Announcements
ries are
the
he paths
ive
roduction cut. We observe increasingly
positive CAR values during the post announcement period beyond t=1. One explanation for this
production level, i.e. no change. For all the normal performance models utilized, we observe gradually
The paths of the cumulative abnormal returns for each of the three OPEC announcement catego
illustrated in Figures 1, 2, and 3 plotting the CAR’s from the market model, the ARCH model and
Fama-French model, respectively. Within each OPEC announcement category, separate plots are
reported for spot and the three futures return series representing different maturities. First, it is
apparent that the largest reaction to the announcement is observed in the case of spot and shorter
maturity futures contracts. Consistent across the three different normal return models used to estimate
abnormal returns, we find larger abnormal returns for spot and shorter maturity futures contracts.
Second, the OPEC production increase announcements seem to have no significant effect on t
of cumulative abnormal returns. However, consisntent with Guidi, Russel and Tarbert (2006), we find
a significant reaction to OPEC production cut announcements with significantly positive cumulat
abnormal returns following the announcement. Furthermore, there seems to exist a degree of
persistence in CAR paths following the announcement of a p
observation might be that the market shows an incomplete reaction to the announcement leading to
further price adjustments during post announcement period.
Interestingly, the market seems to react to OPEC’s announcements on maintaining the current
11

decreasing CARs following the announcement, suggesting downward price adjustments after OP
announces no changes i
EC
n production levels. Similar to production cut announcements, we observe an
incomplete reaction to the announcement leading to persistence in CAR patterns during the post
announcement period.
l
et, more
2
l the
announcement date (t=0) suggesting some anticipation of the outcome by the market.This is not
surprising as information leakages are possible, even before the conference begins.
t
n
ormal
sitive
Another observation is that, with the exception of abnormal returns estimated using the market mode
(Figure 1), the information content of the final release seems to be anticipated by the mark
apparently in the case of production cut and no change announcements. As can be seen in Figures
and 3, CARs prior to production cut announcements seem to gradually increase unti
After this visual inspection of CAR paths, we formally test whether the market reacts efficiently to
these announcements. For this purpose, we test the significance of the difference between cumulative
average residuals for the day following the announcement and those at a future date during the pos
event period. Table 3 reports the test results for the null hypothesis H0: CART-CAR1 = 0 for selected T
values including 5, 10, 15 and 20 days subsequent to the announcement. Under the null of market
efficiency, one would expect this difference to have an expected value of zero as the market’s reactio
to the announcement would be completed at t=1. Therefore, a significant value for (CART-CAR1)
would indicate an incomplete reaction to the announcement which leads to persistence in abn
returns during the post event period. Consistent with our visual inspection of Figures 1-3, we find no
evidence to reject the null hypothesis of efficiency in the case of OPEC production increase
announcements. However, in the case of production cut announcements, we find significant po
returns during the post event period indicating incomplete reaction of investors to the announcement.
Consider the case of T=20 where the market has about three weeks to digest the information.
Regardless of the normal performance model used to estimate abnormal returns, all CARs are found to
12

be statistically significant and positive. Positive returns estimated take on values as high as 7.58%,
7.17%, 6.07%, 4.60% for the spot market, nearest futures contract, third closest contract, and twelfth
closest contract respectively. Considering the fact that these returns (CAR20-CAR1) are approxim
one month returns, they amount to annual returns of as high as 90% for the spot market and 55% fo
the longest maturity futures market. Clearly, these profit opportunities are not only statistically
significant but also economically significant too. As a result, transaction costs cannot explain this
abnormal performance as futures markets (in particular energy futures) have evolved to be one of the
most liquid markets. Similarly, one can suggest greater return volatility during the event period to
explain the abnormal performance. However, in a study of implied volatilities from options on cr
oil futures surrounding OPEC meetings, Horan, Peterson, and Mahar (2004) find that highly visible bi-
annual conferences are associated with a drop, not increase, in volatility. Furthermore, the most
pronounced decline in volatility coincides with the meetings of
ately
r
ude
the Ministerial Monitoring Committee,
which makes production recommendations to the larger conference. Therefore, none of these two
arguments can be used to explain this abnormal performance.
d. In short, consistent with Guidi,
Russel and Tarbert (2006), we find a significant market reaction to production cut announcements with
substantial abnormal returns during the post announcement period.
4.2. Strategic Petroleum Reserve (SPR) Announcements
sed from
ama-
Regarding OPEC announcements to maintain current production levels, i.e. no change, we find some
evidence of return persistence, but only on the downside. However, the statistical tests do not lead to
consistent results across the three different normal return models use
Figures 4-6 illustrate CAR paths around SPR announcements. Once again, each SPR press release is
one event and each event is classified into two categories: SPR increase (when oil is purcha
the market) and SPR decrease (when oil is released to the market). With the exception of the F
13

French model based abnormal returns (in Figure 6), we find that the market reacts to these
announcements with downward (upward) price adjustments after SPR drawdown (purchase
announcements. Visual inspection of CAR paths in Figures 4 and 5 suggests that the government’s us
of this program initiates a short-run market reaction lasting for about a week following the
announcement date. However, statistical tests of cumulative ab
)
e
normal return differences reported in
Table 4, do not yield consistently significant differences for (CART-CAR1) suggesting no statistically
significant impact of these announcements on the oil market.
5. Conclusions
he
petroleum supply interruption on economic
activity by having sufficient petroleum reserves. Therefore, this study sheds a light on the impact of the
government’s use of the reserves on oil market activity.
se
ase
This paper uses the event study methodology to study the effects of OPEC conferences and U.S.
Strategic Petroleum Reserve announcements on the crude oil market activity in the U.S. We examine a
total of 63 OPEC press releases and 15 SPR announcements over the period 1983-2008 and test
whether the market reaction to these announcements conforms to the efficient market hypothesis. T
study has several contributions. First, we provide evidence from both spot and futures markets in order
to examine whether these events affect more short or long end of the crude oil market. Second, we
perform separate tests by using three different measures of abnormal (excess) returns estimated using
the market model, the ARCH model, and the three-factor Fama-French model. Third, we include in
our analysis the events regarding the Department of Energy’s SPR announcements. The SPR Program
was established to prevent the negative effects of a major
Our tests of cumulative abnormal returns suggest no significant reaction to OPEC production increa
announcements regardless of the normal peformance model used in the analysis. However, in the c
of production cut announcements, we find significant positive returns during the post event period
14

indicating incomplete reaction of investors to the announcement. The degree of return persistence
following OPEC production cut announcements creates substantial excess returns to investors who
take long positions on the day following the end of OPEC conferences. We find that these excess
returns can amount to annual returns of as high as 90% in the spot market and 55% in the longest
maturity fu
tures market. Similarly, in the case of OPEC announcements to maintain current production
levels, i.e. no change in production levels, we find some evidence of return persistence, however on the
downside.
tes a short-
rn differences suggest no statistically significant impact of these
announcements on the oil market, suggesting that the SPR Program may not be an effective tool to
stabilize the oil market.
In the case of SPR announcements, we find that the government’s use of this program initia
run market reaction lasting for about a week following the announcement date. However, tests of
cumulative abnormal retu
15

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16

Table 1: Descriptive Statistics
Sample Period (March 30, 1983 – June 1, 2008)
N = 6303
Spot Future1 Future3 Future12
Mean 0.022% 0.044% 0.041% 0.051%
Std. Dev. 2.376% 2.056% 1.788% 1.389%
Maximum -40.204% -38.407% -28.427% -12.948%
Minimum 19.861% 12.353% 11.256% 7.976%
Skewness -1.014 -1.260 -0.850 -0.424
Kurtosis 19.375 23.261 13.643 4.501
ρs,f 0.850 0.813 0.729
Note: ρs,f is the correlation coefficient between spot and futures return series.
Table 2: OPEC and SPR Announcements.
Announcements
OPEC production hike 17
OPEC production cut 21
OPEC no change 25
Total OPEC 63
SPR decrease (Release to the market) 11
SPR increase (Purchase from the market) 4
Total SPR 15
Note: Each OPEC conference or SPR press release is one event. ‘SPR decrease’
indicates announcements on the release of crude oil to the market from the Strategic
Petroleum Reserves. ‘SPR increase’ indicates announcements on crude oil purchases
to build SPR inventories.
17

Table 3: CAR Differences (%) and Absolute t-Statistics (OPEC Announcements).
Event Day of CAR
Increment Relative
to CAR for t=1
Spot Returns Nearest Contract, F1 Third-closest Contract, F3 Twelfth-closest Contract, F12
CAR1 CAR2 CAR3 CAR1 CAR2 CAR3 CAR1 CAR2 CAR3 CAR1 CAR2 CAR3
OPEC Increase
5 0.42
rease
ang
0.60 0.27 0.23 0.25 0.32 0.29 0.42 0.65 0.48 0.24 0.18
(0.40) (0.46) (0.20) (0.23) (0.21) (0.26) (0.31) (0.39) (0.55) (0.57) (0.26) (0.19)
10 0.40 -0.79 -1.83 -0.23 -1.18 -2.09 0.18 -0.87 -1.69 0.84 -0.33 -0.89
(0.25) (0.41) (0.90) (0.15) (0.68) (1.12) (0.20) (0.26) (0.37) (0.38) (0.17) (0.13)
15 0.20 0.52 -1.14 -0.52 -0.09 -1.38 -0.28 0.07 -0.90 0.15 0.17 -0.95
(0.10) (0.21) (0.45) (0.12) (0.55) (0.90) (0.16) (0.21) (0.30) (0.30) (0.14) (0.10)
20 -1.18 -1.87 -3.22 -1.39 -1.80 -3.16 -0.94 -1.19 -2.23 -0.06 -0.72 -1.84
(0.51) (0.66) (1.09) (0.10) (0.47) (0.77) (0.14) (0.18)
(0.25)
(0.26)
(0.12)
(0.09)
OPEC Dec
5 2.06*2.90** 1.56 1.45*2.60** 1.21 1.17*2.09** 0.99*0.70*2.09** 1.32*
(1.74) (2.21) (1.12) (1.87) (2.30) (1.07) (1.79) (2.25) (1.07) (1.26) (2.63) (1.60)
10 1.83 3.83** 2.35 1.47 3.25** 1.66 1.34*2.60** 1.59 0.51 2.01*1.42
(1.03) (1.95) (1.12) (1.26) (1.91) (0.97) (1.38) (1.86) (1.14) (0.62) (1.68) (1.15)
15 3.77*6.91*** 4.93** 3.01** 6.26*** 3.72** 3.24*** 5.51*** 3.60** 2.04** 4.35*** 3.28**
(1.71) (2.82) (1.89) (2.07) (2.95) (1.75) (2.66) (3.17) (2.07) (1.96) (2.91) (2.13)
20 3.41*7.58*** 4.15*2.90** 7.17*** 3.21 3.08** 6.07*** 3.28** 1.61*4.60*** 2.80**
(1.32)
e
(2.65) (1.37) (1.71) (2.90)
(1.30)
(2.17)
(3.00)
(1.62)
(1.33)
(2.65)
(1.56)
OPEC No Ch
5 -0.76 -0.59 -0.53 -1.53** -1.22 -1.31 -1.43** -1.09 -1.23 -1.01** -0.79 -1.01
(1.01) (0.67) (0.52) (2.11) (1.26) (1.15) (2.32) (1.37) (1.30) (2.15) (1.17) (1.34)
10 -1.55*-2.37*-2.48*-2.10** -2.43*-2.63*-2.24** -2.33** -2.58** -1.57** -1.82*-2.11**
(1.38) (1.81) (1.62) (1.93) (1.68) (1.53) (2.42) (1.95) (1.82) (2.22) (1.80) (1.86)
15 -2.15*-2.13 -3.09*-2.15*-1.68 -2.52 -2.34** -1.72 -2.52*-1.38*-0.86 -1.69
(1.53) (1.30) (1.62) (1.58) (0.93) (1.18) (2.03) (1.15) (1.43) (1.56) (0.68) (1.19)
20 -2.95** -2.53*-4.27** -3.10** -2.15 -3.78*-3.15** -2.17 -3.64** -1.53*-1.02 -2.19*
(1.80) (1.33) (1.92) (1.96) (1.02) (1.52) (2.35) (1.25) (1.77) (1.49) (0.70) (1.33)
Note: The significance of the difference between cumulative abnormal returns for day T and day 1 (for T=5, 10, 15, and 20) are tested. CAR1, CAR2, and CAR3
represent the abnormal returns obtained using the market model, ARCH model and the Fama-French model, respectively. Differences marked with a *** (**, *) are
statistically significant at the 1% (5%, 10%) level. Absolute t-statistics are in brackets.

Table 4: CAR Differences (%) and Absolute t-Statistics (SPR Announcements).
Event Day of CAR
Increment Relative
to CAR for t=1
Spot Returns Nearest Contract, F1 Third-closest Contract, F3 Twelfth-closest Contract, F12
CAR1 CAR2 CAR3 CAR1 CAR2 CAR3 CAR1 CAR2 CAR3 CAR1 CAR2 CAR3
SPR Increase
5
ease
0.30 2.96 3.54*0.99 3.34*3.95*0.68 2.66 3.01*0.11 1.56 1.76
(0.19) (1.38) (1.58) (0.72) (1.63) (1.89) (0.55) (1.44) (1.61) (0.10) (1.05) (1.16)
10 -0.06 4.31 3.67 1.06 4.73*4.63*0.84 3.97*3.58 0.63 2.88 2.90
(0.02) (1.34) (1.09) (0.51) (1.54) (1.48) (0.45) (1.44) (1.28) (0.39) (1.29) (1.28)
15 -0.09 4.73 4.32 1.47 6.03*6.56*1.50 5.54*5.63*1.19 4.15*4.95**
(0.03) (1.18) (1.03) (0.57) (1.57) (1.68) (0.65) (1.61) (1.62) (0.59) (1.49) (1.75)
20 -1.58 3.85 2.59 0.61 5.46 6.18*1.18 5.50*5.80*1.23 4.42*5.88**
(0.46) (0.82) (0.53) (0.20) (1.22) (1.36) (0.44) (1.37)
(1.43)
(0.53)
(1.36)
(1.78)
SPR Decr
5 -2.20*3.54 4.87*-2.20*1.54 3.49 -1.42 0.76 2.44 -0.68 0.48 1.02
(1.44) (1.04) (1.58) (1.76) (0.46) (1.14) (1.36) (0.32) (1.17) (0.84) (0.30) (0.69)
10 -2.30 1.32 5.17 -2.10 2.08 7.03*-1.12 1.48 5.84** -0.32 1.52 3.04*
(1.01) (0.26)
(1.12) (1.12) (0.41) (1.52) (0.71) (0.42) (1.86) (0.26) (0.63) (1.37)
15 0.42 2.50 8.48*-1.51 2.28 9.17*-1.16 1.21 7.00** -0.45 1.63 3.31
(0.15) (0.39)
(1.47)
(0.65) (0.36) (1.59) (0.59) (0.28) (1.79) (0.29) (0.55) (1.20)
20 -3.97 -0.51 6.77 -3.93*1.35 9.35*-3.35*0.20 6.87*2.07 1.03 2.91
(1.20) (0.07) (1.01) (1.44) (0.18) (1.39) (1.47) (0.04) (1.51) (1.16) (0.30) (0.90)
Note: The significance of the difference between cumulative abnormal returns for day T and day 1 (for T=5, 10, 15, and 20) are tested. CAR1, CAR2, and CAR3
represent the abnormal returns obtained using the market model, ARCH model and the Fama-French model, respectively. Differences marked with a *** (**, *) are
statistically significant at the 1% (5%, 10%) level. Absolute t-statistics are in brackets.
19

Figure 1. Cumulative abnormal returns for OPEC announcements from event day -20 to event day 20.
The abnormal return is calculated using the market model as the normal return measure.
Spot Returns
-6.000%
-5.000%
-4.000%
-3.000%
-2.000%
-1.000%
0.000%
1.000%
2.000%
3.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Clo ses t Future s Contra ct
-5.000%
-4.000%
-3.000%
-2.000%
-1.000%
0.000%
1.000%
2.000%
-20-18-16-14-12-10-8-6-4-202468101214161820
Eve n t T im e
CAR
Increase No Change Decrease
Third Close st Futures Contract
-5.000%
-4.000%
-3.000%
-2.000%
-1.000%
0.000%
1.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Twelfth Closest Futures Contract
-4.000%
-3.000%
-2.000%
-1.000%
0.000%
1.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease

Figure 2. Cumulative abnormal returns for OPEC announcements from event day -20 to event day 20.
The abnormal return is calculated using the ARCH model as the normal return measure.
Spot Returns
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
-20-18-16-14-12-10-8-6-4-202468101214161820
Eve n t T im e
CAR
Increase No Change Decrease
Close st Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Third Close st Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Twelfth Closest Futures Contract
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
21

Figure 3. Cumulative abnormal returns for OPEC announcements from event day -20 to event day 20.
The abnormal return is calculated using the Fama-French model as the normal return measure.
Spot Returns
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Close st Futures Contract
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Sixth Closest Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
Twelfth Closest Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
Increase No Change Decrease
22

Figure 4. Cumulative abnormal returns for SPR announcements from event day -20 to event day 20.
The abnormal return is calculated using the market model as the normal return measure.
Spot Returns
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t Ti m e
CAR
SPR Increase S PR Decr eas e
Close st Futures Contract
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Dec re ase
Third Clo sest Future s Contrac t
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Dec re ase
Twelfth Closest Futures Contract
-6.000%
-5.000%
-4.000%
-3.000%
-2.000%
-1.000%
0.000%
1.000%
2.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Decr eas e
23

Figure 5. Cumulative abnormal returns for SPR announcements from event day -20 to event day 20.
The abnormal return is calculated using the ARCH model as the normal return measure.
Spot Returns
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Dec rea se
Closes t Futures Contract
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
-20-18-16-14-12-10-8-6-4-202468101214161820
Eve n t T im e
CAR
SPR Increase SPR Dec rea se
Third Closest Future s Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Decr ease
Twelfth Closest Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increas e SPR Decr eas e
24

Figure 6. Cumulative abnormal returns for SPR announcements from event day -20 to event day 20.
The abnormal return is calculated using the Fama-French model as the normal return measure.
Spot Returns
-10.000%
-8.000%
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Decrease
Closes t Futures Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
12.000%
-20-18-16-14-12-10-8-6-4-202468101214161820
Eve n t T im e
CAR
SPR Increase SPR Dec rea se
Third Closest Future s Contract
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increase SPR Dec rea se
Twelfth Closest Futures Contract
-4.000%
-2.000%
0.000%
2.000%
4.000%
-20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20
Eve n t T im e
CAR
SPR Increas e SPR Decr eas e
25

APPENDIX: Abnormal and cumulative abnormal returns during the event period.
Table 5. Abnormal and Cumulative Abnormal Returns Around OPEC Announcements. (The
abnormal return is calculated using the market model as the normal return measure)
Market Model (Spot Returns)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.326% 0.326% 0.223% 0.223% -0.332% -0.332%
-19 -0.177% 0.149% -0.353% -0.130% -0.048% -0.380%
-18 0.811% 0.960% 0.092% -0.038% 0.070% -0.310%
-17 -0.895% 0.065% -0.261% -0.298% -0.028% -0.337%
-16 0.890% 0.955% -0.321% -0.619% 0.223% -0.114%
-15 0.049% 1.005% -1.174% -1.794% 0.102% -0.012%
-14 -0.135% 0.870% -0.031% -1.825% -0.455% -0.467%
-13 -0.328% 0.542% 0.006% -1.819% 0.434% -0.033%
-12 0.019% 0.561% -0.790% -2.608% 0.434% 0.400%
-11 -0.003% 0.558% 0.004% -2.604% 0.102% 0.502%
-10 0.885% 1.442% -0.282% -2.886% 0.520% 1.022%
-9 -0.760% 0.683% -0.252% -3.138% 0.168% 1.190%
-8 0.416% 1.099% -0.489% -3.627% -0.018% 1.172%
-7 0.652% 1.751% -0.262% -3.889% -0.028% 1.144%
-6 -0.126% 1.625% -0.399% -4.288% -0.649% 0.495%
-5 -0.916% 0.709% -0.643% -4.931% -0.168% 0.327%
-4 -0.821% -0.112% 0.142% -4.789% -0.220% 0.107%
-3 0.823% 0.710% -0.077% -4.866% -1.103% -0.996%
-2 1.096% 1.807% 0.486% -4.381% 0.151% -0.845%
-1 -0.785% 1.021% 0.393% -3.987% -0.180% -1.025%
0 -0.562% 0.460% -0.297% -4.284% -0.154% -1.179%
1 -0.316% 0.144% -0.172% -4.456% 0.605% -0.575%
2 0.550% 0.694% 0.254% -4.202% 0.005% -0.569%
3 -0.323% 0.371% 0.346% -3.856% 0.209% -0.360%
4 -0.061% 0.310% 0.900% -2.956% -0.661% -1.022%
5 0.254% 0.565% 0.557% -2.399% -0.308% -1.330%
6 -0.054% 0.510% 0.976% -1.423% -0.534% -1.864%
7 0.153% 0.663% -0.252% -1.675% -0.156% -2.020%
8 -0.692% -0.029% 0.277% -1.398% -0.070% -2.090%
9 -0.089% -0.118% -0.224% -1.622% -0.005% -2.096%
10 0.658% 0.540% -1.001% -2.623% -0.031% -2.126%
11 -0.389% 0.151% 0.811% -1.811% -0.418% -2.544%
12 0.071% 0.222% 0.242% -1.569% 0.453% -2.091%
13 -0.059% 0.163% 0.026% -1.543% -0.344% -2.435%
14 -0.172% -0.009% 0.108% -1.435% 0.144% -2.291%
15 0.351% 0.342% 0.751% -0.684% -0.429% -2.720%
16 0.128% 0.470% -1.471% -2.155% -0.609% -3.330%
17 -0.307% 0.163% -0.304% -2.459% 0.362% -2.967%
18 -0.567% -0.404% 1.651% -0.808% -0.721% -3.688%
19 -0.313% -0.717% 0.295% -0.513% -0.116% -3.804%
20 -0.318% -1.036% -0.529% -1.042% 0.283% -3.521%
Note: AR is the sample average abnormal return for the specified day in event time and CAR is the
sample average cumulative abnormal return for day -20 to the specified day. Event time is days
relative to the announcement date.
26

(Table 5 continued)
Market Model (Nearby Futures Contract, F1)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.308% 0.308% 0.085% 0.085% -0.198% -0.198%
-19 -0.044% 0.264% -0.314% -0.229% -0.108% -0.306%
-18 0.509% 0.773% -0.327% -0.555% 0.174% -0.132%
-17 -0.898% -0.126% 0.245% -0.310% 0.204% 0.072%
-16 0.482% 0.357% -0.575% -0.886% 0.230% 0.303%
-15 -0.077% 0.279% -1.012% -1.897% -0.185% 0.117%
-14 -0.175% 0.104% 0.145% -1.752% -0.074% 0.043%
-13 -0.318% -0.214% -0.228% -1.980% 0.275% 0.318%
-12 -0.080% -0.294% -0.599% -2.579% 0.077% 0.395%
-11 -0.381% -0.675% -0.191% -2.770% 0.377% 0.771%
-10 0.901% 0.226% -0.368% -3.139% 0.540% 1.312%
-9 -0.752% -0.527% -0.121% -3.260% -0.015% 1.296%
-8 0.200% -0.327% -0.213% -3.472% -0.169% 1.128%
-7 0.565% 0.238% -0.589% -4.061% -0.260% 0.868%
-6 -0.052% 0.186% 0.226% -3.836% -0.375% 0.493%
-5 -0.614% -0.428% -0.453% -4.288% -0.375% 0.118%
-4 -0.295% -0.723% 0.396% -3.892% -0.057% 0.062%
-3 0.165% -0.559% -0.234% -4.126% -1.022% -0.960%
-2 1.469% 0.910% -0.018% -4.144% 0.253% -0.708%
-1 -1.205% -0.295% 0.183% -3.962% -0.216% -0.923%
0 0.117% -0.178% -0.279% -4.241% -0.210% -1.134%
1 -0.254% -0.432% -0.004% -4.245% 0.758% -0.375%
2 0.302% -0.130% 0.337% -3.908% -0.382% -0.757%
3 -0.551% -0.681% 0.348% -3.560% 0.073% -0.684%
4 -0.017% -0.698% 0.350% -3.210% -0.534% -1.219%
5 0.500% -0.198% 0.415% -2.795% -0.688% -1.906%
6 0.017% -0.181% 0.698% -2.097% -0.344% -2.250%
7 -0.664% -0.845% -0.045% -2.141% -0.085% -2.335%
8 -0.247% -1.092% -0.112% -2.253% 0.047% -2.288%
9 -0.242% -1.334% -0.222% -2.475% -0.014% -2.302%
10 0.676% -0.658% -0.304% -2.780% -0.178% -2.480%
11 -0.070% -0.728% 0.737% -2.043% -0.100% -2.579%
12 0.223% -0.505% 0.107% -1.937% 0.378% -2.201%
13 -0.359% -0.863% -0.115% -2.051% -0.179% -2.380%
14 -0.219% -1.082% 0.314% -1.737% 0.246% -2.133%
15 0.133% -0.949% 0.504% -1.233% -0.388% -2.521%
16 -0.183% -1.132% -0.441% -1.674% -0.751% -3.272%
17 0.332% -0.801% -0.407% -2.081% 0.230% -3.042%
18 -0.051% -0.852% 0.554% -1.527% -0.614% -3.656%
19 -1.080% -1.932% 0.302% -1.225% -0.231% -3.887%
20 0.108% -1.824% -0.123% -1.348% 0.410% -3.476%
27

(Table 5 continued)
Market Model (Third Closest Contract, F3)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.158% 0.158% -0.060% -0.060% -0.184% -0.184%
-19 -0.128% 0.030% -0.225% -0.285% -0.040% -0.223%
-18 0.475% 0.505% -0.256% -0.541% 0.092% -0.131%
-17 -0.725% -0.220% 0.277% -0.265% 0.076% -0.055%
-16 0.380% 0.160% -0.480% -0.745% 0.203% 0.148%
-15 0.049% 0.209% -0.789% -1.534% -0.212% -0.063%
-14 -0.217% -0.007% 0.048% -1.485% -0.161% -0.225%
-13 -0.221% -0.228% -0.091% -1.576% 0.207% -0.018%
-12 -0.213% -0.441% -0.412% -1.989% 0.060% 0.042%
-11 -0.460% -0.901% -0.104% -2.092% 0.291% 0.333%
-10 0.816% -0.085% -0.240% -2.332% 0.396% 0.728%
-9 -0.653% -0.738% 0.142% -2.191% -0.136% 0.592%
-8 0.174% -0.564% -0.144% -2.335% -0.153% 0.439%
-7 0.574% 0.010% -0.378% -2.713% -0.255% 0.184%
-6 0.069% 0.079% 0.168% -2.546% -0.231% -0.047%
-5 -0.493% -0.414% -0.314% -2.860% -0.392% -0.439%
-4 -0.142% -0.556% 0.355% -2.505% 0.012% -0.428%
-3 0.268% -0.287% -0.195% -2.700% -0.815% -1.243%
-2 1.334% 1.047% 0.035% -2.664% 0.082% -1.161%
-1 -1.318% -0.271% 0.002% -2.662% -0.304% -1.465%
0 0.049% -0.222% -0.224% -2.886% -0.216% -1.681%
1 -0.029% -0.251% 0.134% -2.752% 0.692% -0.989%
2 0.269% 0.018% 0.213% -2.538% -0.379% -1.367%
3 -0.371% -0.352% 0.269% -2.269% 0.073% -1.294%
4 -0.004% -0.356% 0.229% -2.040% -0.490% -1.785%
5 0.396% 0.040% 0.454% -1.586% -0.630% -2.415%
6 -0.020% 0.020% 0.538% -1.047% -0.253% -2.668%
7 -0.600% -0.580% -0.003% -1.051% -0.178% -2.846%
8 -0.137% -0.716% 0.013% -1.037% 0.043% -2.803%
9 -0.104% -0.820% -0.188% -1.225% -0.062% -2.865%
10 0.753% -0.067% -0.182% -1.408% -0.360% -3.226%
11 -0.131% -0.198% 0.652% -0.756% -0.205% -3.431%
12 0.235% 0.037% 0.217% -0.539% 0.329% -3.102%
13 -0.240% -0.203% -0.057% -0.597% -0.155% -3.257%
14 -0.217% -0.421% 0.476% -0.121% 0.208% -3.049%
15 -0.107% -0.528% 0.605% 0.485% -0.275% -3.324%
16 -0.220% -0.748% -0.417% 0.067% -0.583% -3.907%
17 0.314% -0.433% -0.401% -0.334% 0.172% -3.734%
18 -0.007% -0.441% 0.460% 0.127% -0.599% -4.334%
19 -0.890% -1.330% 0.212% 0.338% -0.126% -4.459%
20 0.139% -1.191% -0.011% 0.328% 0.320% -4.139%
28

(Table 5 continued)
Market Model (Twelfth Closest Contract, F12)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.030% 0.030% -0.119% -0.119% -0.167% -0.167%
-19 -0.146% -0.117% -0.014% -0.134% 0.137% -0.030%
-18 0.323% 0.206% -0.101% -0.234% -0.013% -0.042%
-17 -0.253% -0.047% 0.373% 0.139% -0.098% -0.140%
-16 0.375% 0.328% 0.004% 0.143% 0.082% -0.058%
-15 0.126% 0.455% -0.374% -0.232% -0.176% -0.234%
-14 -0.376% 0.079% 0.031% -0.201% -0.210% -0.444%
-13 -0.130% -0.051% -0.004% -0.205% 0.105% -0.339%
-12 -0.501% -0.552% -0.282% -0.488% 0.095% -0.244%
-11 -0.352% -0.904% -0.150% -0.638% 0.176% -0.067%
-10 0.783% -0.121% -0.278% -0.915% 0.164% 0.096%
-9 -0.451% -0.572% 0.309% -0.606% -0.246% -0.149%
-8 0.191% -0.381% 0.033% -0.573% -0.075% -0.225%
-7 0.497% 0.117% -0.368% -0.941% -0.212% -0.436%
-6 0.401% 0.518% 0.232% -0.709% -0.025% -0.461%
-5 -0.287% 0.232% -0.265% -0.974% -0.337% -0.799%
-4 -0.083% 0.148% 0.194% -0.780% 0.242% -0.556%
-3 0.215% 0.363% -0.104% -0.884% -0.549% -1.105%
-2 1.084% 1.448% 0.113% -0.771% 0.183% -0.922%
-1 -1.218% 0.230% 0.124% -0.648% -0.386% -1.308%
0 0.181% 0.411% -0.259% -0.907% -0.124% -1.432%
1 0.254% 0.665% 0.068% -0.839% 0.399% -1.033%
2 0.258% 0.923% 0.122% -0.718% -0.453% -1.485%
3 -0.292% 0.632% 0.183% -0.535% 0.087% -1.398%
4 0.276% 0.908% -0.132% -0.667% -0.189% -1.588%
5 0.239% 1.147% 0.525% -0.142% -0.459% -2.047%
6 0.061% 1.208% 0.219% 0.077% -0.109% -2.156%
7 -0.565% 0.643% -0.211% -0.133% -0.205% -2.360%
8 0.014% 0.657% 0.105% -0.028% 0.075% -2.286%
9 0.166% 0.823% -0.162% -0.191% 0.087% -2.198%
10 0.685% 1.508% -0.136% -0.327% -0.407% -2.605%
11 -0.139% 1.369% 0.465% 0.138% -0.171% -2.776%
12 0.010% 1.379% 0.223% 0.360% 0.299% -2.476%
13 -0.108% 1.270% -0.268% 0.092% -0.024% -2.501%
14 -0.099% 1.172% 0.555% 0.647% 0.255% -2.245%
15 -0.358% 0.814% 0.550% 1.197% -0.163% -2.408%
16 -0.239% 0.575% -0.370% 0.827% -0.390% -2.799%
17 0.349% 0.924% -0.612% 0.216% 0.239% -2.559%
18 0.142% 1.066% 0.368% 0.584% -0.266% -2.826%
19 -0.748% 0.318% 0.090% 0.674% 0.062% -2.763%
20 0.285% 0.602% 0.095% 0.769% 0.200% -2.563%
29

Table 6. Abnormal and Cumulative Abnormal Returns Around OPEC Announcements. (The abnormal
return is calculated using the ARCH model as the normal return measure)
ARCH Model (Spot Returns)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.363% 0.363% 0.164% 0.164% -0.369% -0.369%
-19 0.319% 1.007% -0.384% -0.227% -0.591% -0.960%
-18 0.272% 1.330% -0.083% -0.171% -0.179% -1.138%
-17 -0.831% 0.641% -0.103% -0.161% -0.119% -1.257%
-16 1.399% 2.055% -0.511% -0.408% 0.648% -0.609%
-15 0.147% 1.875% -0.472% -1.024% -0.004% -0.613%
-14 0.984% 2.967% 0.667% -0.259% -0.528% -1.142%
-13 0.333% 2.576% 0.129% -0.265% 0.363% -0.778%
-12 0.010% 2.533% -0.896% -0.963% 0.212% -0.566%
-11 -0.239% 3.013% 0.204% -0.655% 0.373% -0.193%
-10 0.607% 3.572% 1.106% 0.432% 0.455% 0.262%
-9 0.197% 3.553% 0.207% 0.204% 0.120% 0.382%
-8 -0.073% 2.885% 0.022% 0.318% -0.250% 0.133%
-7 0.849% 4.214% -0.423% -0.285% -0.338% -0.206%
-6 0.620% 4.387% 0.307% 0.176% -0.420% -0.626%
-5 -0.576% 3.367% -0.362% -0.249% -0.535% -1.161%
-4 -1.609% 1.857% 0.836% 0.598% 0.117% -1.043%
-3 0.672% 3.506% 0.352% 0.633% -0.698% -1.741%
-2 0.909% 3.920% 0.227% 0.925% 0.255% -1.486%
-1 -0.966% 2.907% 0.932% 2.249% -0.162% -1.647%
0 -0.754% 2.485% 0.332% 2.465% -0.148% -1.795%
1 0.050% 3.307% -0.529% 1.540% 0.755% -1.040%
2 -0.206% 3.044% 0.413% 1.873% -0.152% -1.193%
3 0.011% 3.600% 0.710% 2.651% -0.109% -1.302%
4 0.136% 3.638% 1.015% 3.548% -0.230% -1.532%
5 0.219% 3.904% 0.920% 4.439% -0.094% -1.627%
6 1.133% 4.550% 0.901% 5.660% -0.541% -2.167%
7 0.817% 4.635% 0.004% 5.813% -0.673% -2.840%
8 -0.704% 3.139% -0.082% 5.617% -0.509% -3.349%
9 -0.678% 2.634% 0.340% 6.194% -0.177% -3.526%
10 0.094% 2.513% -0.511% 5.368% 0.117% -3.409%
11 -0.259% 2.446% 1.252% 6.576% -0.723% -4.132%
12 0.694% 3.551% 1.436% 7.897% -0.108% -4.240%
13 -0.612% 2.830% 0.860% 8.190% -0.274% -4.514%
14 0.706% 3.792% -0.092% 7.801% 0.577% -3.937%
15 0.533% 3.830% 0.626% 8.446% 0.769% -3.167%
16 -0.449% 3.272% -0.355% 7.999% -0.968% -4.136%
17 0.235% 3.823% -1.586% 5.900% 0.142% -3.993%
18 0.080% 3.416% 1.504% 8.627% 0.259% -3.734%
19 -0.094% 2.944% 0.453% 9.116% -0.465% -4.199%
20 -0.995% 1.436% 0.016% 9.122% 0.627% -3.572%
Note: AR is the sample average abnormal return for the specified day in event time and CAR is the
sample average cumulative abnormal return for day -20 to the specified day. Event time is days
relative to the announcement date.
30

(Table 6 continued)
ARCH Model (Nearby Futures Contract, F1)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.320% 0.320% 0.151% 0.151% -0.245% -0.245%
-19 0.416% 1.073% -0.438% -0.281% -0.629% -0.874%
-18 0.055% 1.198% -0.438% -0.563% -0.113% -0.986%
-17 -0.887% 0.490% 0.086% -0.294% 0.171% -0.816%
-16 0.989% 1.594% -0.651% -0.565% 0.632% -0.183%
-15 0.003% 1.387% -0.444% -1.158% -0.489% -0.672%
-14 0.453% 2.019% 0.988% 0.052% 0.110% -0.562%
-13 0.292% 2.007% 0.079% -0.153% 0.276% -0.286%
-12 0.240% 2.240% -0.726% -0.706% -0.113% -0.399%
-11 -0.772% 1.835% 0.125% -0.463% 0.592% 0.193%
-10 0.670% 2.808% 0.932% 0.460% 0.558% 0.751%
-9 -0.103% 2.465% 0.428% 0.615% -0.113% 0.638%
-8 0.579% 2.731% 0.063% 0.756% -0.398% 0.239%
-7 0.497% 2.862% -0.817% -0.172% -0.812% -0.573%
-6 0.630% 3.345% 0.761% 0.793% 0.068% -0.505%
-5 -0.079% 2.879% -0.406% 0.240% -0.824% -1.329%
-4 -0.619% 2.110% 0.797% 1.224% 0.383% -0.946%
-3 -0.031% 2.404% 0.101% 1.235% -0.809% -1.755%
-2 1.306% 3.484% 0.516% 1.856% 0.352% -1.403%
-1 -1.315% 2.010% 0.798% 2.424% -0.218% -1.621%
0 -0.199% 2.248% 0.202% 2.593% -0.203% -1.824%
1 0.188% 3.063% -0.351% 2.005% 0.914% -0.910%
2 -0.551% 2.330% 0.612% 2.552% -0.427% -1.337%
3 -0.308% 2.740% 0.702% 3.238% -0.243% -1.580%
4 0.287% 3.118% 0.493% 3.646% -0.064% -1.644%
5 0.274% 3.309% 0.871% 4.607% -0.488% -2.132%
6 0.791% 3.741% 0.647% 5.515% -0.315% -2.448%
7 0.211% 3.597% 0.140% 5.837% -0.400% -2.847%
8 -0.277% 2.583% -0.530% 5.125% -0.323% -3.170%
9 -1.088% 1.532% 0.341% 5.885% -0.095% -3.265%
10 0.159% 1.879% -0.349% 5.254% -0.077% -3.342%
11 0.352% 2.366% 1.124% 6.509% -0.302% -3.644%
12 0.983% 3.370% 1.494% 7.904% -0.198% -3.842%
13 -0.375% 2.705% 0.631% 7.951% -0.155% -3.997%
14 0.480% 3.029% -0.005% 7.733% 0.646% -3.351%
15 0.275% 2.975% 0.396% 8.260% 0.760% -2.591%
16 -0.173% 2.762% 0.130% 8.305% -1.064% -3.655%
17 0.573% 3.206% -0.717% 7.460% 0.006% -3.649%
18 0.261% 3.097% 0.552% 8.335% 0.358% -3.290%
19 -0.688% 2.200% 0.599% 9.130% -0.601% -3.891%
20 -0.537% 1.260% 0.204% 9.178% 0.831% -3.060%
31

(Table 6 continued)
ARCH Model (Third Closest Contract, F3)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.239% 0.239% 0.204% 0.204% -0.212% -0.212%
-19 0.356% 0.838% 0.054% 0.043% -0.483% -0.696%
-18 -0.092% 0.741% -0.195% -0.442% -0.092% -0.788%
-17 -0.795% 0.255% 0.173% -0.320% 0.062% -0.726%
-16 0.815% 1.205% -0.466% -0.497% 0.516% -0.210%
-15 -0.038% 1.015% -0.119% -0.817% -0.455% -0.665%
-14 0.316% 1.583% 0.828% 0.000% -0.016% -0.681%
-13 0.366% 1.670% 0.269% -0.032% 0.198% -0.483%
-12 -0.121% 1.479% -0.455% -0.465% -0.047% -0.529%
-11 -0.857% 1.144% 0.167% -0.300% 0.526% -0.003%
-10 0.510% 2.026% 0.979% 0.635% 0.467% 0.464%
-9 -0.180% 1.735% 0.605% 0.872% -0.239% 0.225%
-8 0.497% 2.024% 0.059% 0.922% -0.080% 0.145%
-7 0.449% 2.163% -0.569% 0.221% -0.677% -0.532%
-6 0.597% 2.667% 0.477% 0.794% 0.203% -0.329%
-5 0.047% 2.390% -0.332% 0.391% -0.784% -1.113%
-4 -0.471% 1.694% 0.816% 1.329% 0.421% -0.692%
-3 -0.148% 1.823% 0.056% 1.164% -0.633% -1.325%
-2 1.302% 3.128% 0.549% 1.767% 0.176% -1.149%
-1 -1.392% 1.460% 0.757% 2.235% -0.298% -1.447%
0 0.083% 2.001% 0.188% 2.214% -0.190% -1.637%
1 0.057% 2.299% -0.054% 1.897% 0.818% -0.819%
2 -0.477% 1.895% 0.500% 2.220% -0.423% -1.242%
3 -0.240% 2.269% 0.711% 2.888% -0.193% -1.435%
4 0.253% 2.644% 0.426% 3.141% -0.078% -1.513%
5 0.165% 2.715% 0.854% 3.987% -0.394% -1.907%
6 0.580% 2.996% 0.572% 4.732% -0.236% -2.143%
7 0.001% 2.772% 0.203% 5.020% -0.428% -2.571%
8 -0.301% 1.990% -0.356% 4.395% -0.284% -2.855%
9 -0.961% 1.162% 0.315% 5.039% -0.078% -2.933%
10 0.027% 1.429% -0.284% 4.497% -0.214% -3.147%
11 0.325% 2.086% 0.994% 5.592% -0.305% -3.452%
12 0.915% 2.935% 1.457% 6.948% -0.170% -3.622%
13 -0.214% 2.425% 0.568% 6.916% -0.111% -3.733%
14 0.394% 2.638% 0.115% 6.791% 0.582% -3.150%
15 0.029% 2.365% 0.538% 7.405% 0.615% -2.535%
16 -0.209% 2.129% 0.120% 7.386% -0.738% -3.273%
17 0.547% 2.574% -0.482% 6.725% -0.016% -3.289%
18 0.076% 2.289% 0.566% 7.401% 0.225% -3.064%
19 -0.758% 1.517% 0.565% 7.997% -0.450% -3.513%
20 -0.219% 1.113% 0.219% 7.967% 0.528% -2.985%
32

(Table 6 continued)
ARCH Model (Twelfth Closest Contract, F12)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.227% 0.227% -0.126% -0.126% -0.230% -0.230%
-19 0.256% 0.601% -0.105% -0.231% -0.208% -0.439%
-18 0.079% 0.657% -0.182% -0.412% 0.030% -0.408%
-17 -0.279% 0.460% 0.590% 0.178% -0.192% -0.600%
-16 0.914% 1.274% -0.242% -0.064% 0.231% -0.369%
-15 0.394% 1.476% 0.052% -0.012% -0.309% -0.678%
-14 0.014% 1.337% 0.447% 0.435% -0.100% -0.778%
-13 0.297% 1.435% 0.315% 0.750% 0.135% -0.644%
-12 -0.393% 1.044% -0.408% 0.342% -0.090% -0.734%
-11 -0.605% 0.872% 0.023% 0.365% 0.485% -0.249%
-10 0.532% 1.584% 0.426% 0.791% 0.259% 0.010%
-9 -0.311% 1.309% 0.694% 1.485% -0.371% -0.361%
-8 0.297% 1.566% 0.014% 1.499% -0.140% -0.501%
-7 0.600% 2.160% -0.575% 0.924% -0.426% -0.927%
-6 0.558% 2.514% 0.339% 1.263% 0.425% -0.501%
-5 0.073% 2.494% -0.295% 0.968% -0.602% -1.103%
-4 -0.249% 2.041% 0.478% 1.446% 0.564% -0.539%
-3 0.100% 2.280% 0.066% 1.512% -0.402% -0.941%
-2 1.320% 3.402% 0.273% 1.785% 0.226% -0.715%
-1 -1.254% 1.838% 0.640% 2.425% -0.404% -1.119%
0 -0.068% 1.989% -0.251% 2.174% -0.200% -1.319%
1 0.329% 2.841% -0.255% 1.919% 0.540% -0.779%
2 -0.224% 2.644% 0.399% 2.318% -0.525% -1.305%
3 -0.074% 2.972% 0.497% 2.816% -0.047% -1.351%
4 0.254% 3.158% 0.067% 2.883% 0.115% -1.236%
5 -0.171% 3.079% 1.131% 4.013% -0.335% -1.571%
6 0.314% 3.396% 0.404% 4.417% -0.212% -1.783%
7 -0.330% 3.124% -0.305% 4.112% -0.386% -2.169%
8 -0.318% 2.603% 0.018% 4.130% -0.171% -2.340%
9 -0.227% 2.628% 0.007% 4.137% 0.044% -2.296%
10 0.128% 2.512% -0.212% 3.925% -0.308% -2.603%
11 0.245% 3.081% 0.784% 4.708% -0.191% -2.794%
12 0.551% 3.528% 0.764% 5.473% -0.080% -2.874%
13 -0.164% 3.201% -0.014% 5.459% 0.033% -2.841%
14 0.233% 3.360% 0.303% 5.763% 0.601% -2.239%
15 -0.239% 3.007% 0.507% 6.270% 0.602% -1.637%
16 -0.455% 2.494% -0.184% 6.086% -0.602% -2.239%
17 0.164% 2.752% -0.628% 5.458% 0.089% -2.150%
18 0.217% 3.082% 0.571% 6.029% 0.149% -2.001%
19 -0.784% 2.263% 0.177% 6.206% -0.213% -2.214%
20 0.037% 2.118% 0.313% 6.519% 0.413% -1.801%
33

Table 7. Abnormal and Cumulative Abnormal Returns Around OPEC Announcements. (The abnormal
return is calculated using the Fama-French model as the normal return measure)
Fama-French Model (Spot Returns)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.858% 0.858% 0.795% 0.795% -0.311% -0.311%
-19 0.107% 0.938% -0.533% -0.120% -0.443% -0.753%
-18 0.563% 1.641% 0.200% 0.235% -0.081% -0.834%
-17 -1.069% 0.559% -0.976% -0.656% 0.416% -0.419%
-16 1.172% 1.800% -0.301% -0.679% 0.968% 0.549%
-15 -0.327% 1.189% -0.557% -1.408% -0.327% 0.222%
-14 0.397% 2.004% 0.245% -1.020% -0.551% -0.329%
-13 0.115% 1.814% -0.148% -1.209% 0.192% -0.136%
-12 -0.452% 1.159% -1.406% -2.601% -0.049% -0.186%
-11 -0.103% 1.942% -0.304% -2.690% 0.333% 0.148%
-10 0.515% 2.388% 0.375% -2.374% 0.044% 0.192%
-9 -0.213% 2.048% 0.783% -1.967% 0.077% 0.269%
-8 -0.160% 1.443% 0.278% -1.671% -0.132% 0.137%
-7 1.323% 3.063% -0.075% -2.057% -0.372% -0.235%
-6 0.766% 3.166% 0.312% -1.485% -0.257% -0.492%
-5 -0.433% 2.123% -0.187% -1.743% -0.796% -1.288%
-4 -1.269% 0.880% 0.899% -0.859% -0.119% -1.407%
-3 0.633% 2.367% 0.091% -1.163% -1.035% -2.442%
-2 1.099% 2.565% -0.058% -1.317% 0.451% -1.991%
-1 -1.251% 0.889% 1.177% 0.298% -0.583% -2.574%
0 -0.727% 0.862% 0.382% 0.528% -0.441% -3.015%
1 -0.065% 1.623% -0.685% -0.506% 0.904% -2.111%
2 -0.578% 1.154% -0.073% -0.626% 0.054% -2.057%
3 0.276% 2.161% 0.258% -0.209% -0.239% -2.296%
4 0.212% 2.030% 1.012% 0.842% -0.236% -2.532%
5 -0.084% 1.891% 0.367% 1.056% -0.109% -2.641%
6 1.263% 2.940% 0.384% 1.704% -0.538% -3.179%
7 0.781% 2.793% -0.650% 1.692% -0.703% -3.882%
8 -0.806% 1.071% -0.229% 1.576% -0.357% -4.239%
9 -0.787% 0.524% 0.386% 2.353% -0.314% -4.552%
10 -0.462% -0.207% -0.301% 1.839% -0.034% -4.586%
11 -0.476% -0.201% 0.508% 2.528% -0.602% -5.188%
12 0.432% 0.608% 0.861% 3.613% -0.686% -5.874%
13 -0.807% -0.258% 0.514% 3.970% -0.466% -6.340%
14 0.352% 0.327% 0.277% 4.124% 0.967% -5.373%
15 0.476% 0.488% 0.253% 4.425% 0.173% -5.199%
16 -0.068% 0.297% -0.742% 3.599% -1.032% -6.231%
17 -0.079% 0.299% -2.090% 1.148% 0.218% -6.013%
18 0.065% -0.088% 1.687% 3.897% -0.031% -6.044%
19 0.251% -0.178% -0.152% 3.748% -1.058% -7.102%
20 -0.694% -1.593% -0.141% 3.642% 0.719% -6.383%
34

(Table 7 continued)
Fama-French Model (Nearby Futures Contract, F1)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.520% 0.520% 0.886% 0.886% -0.162% -0.162%
-19 0.152% 0.750% -0.775% -0.092% -0.523% -0.686%
-18 0.218% 1.131% -0.332% -0.292% -0.002% -0.687%
-17 -1.228% 0.064% -0.537% -0.632% 0.637% -0.050%
-16 0.878% 1.117% -0.381% -0.622% 0.865% 0.815%
-15 -0.417% 0.502% -0.569% -1.371% -0.722% 0.092%
-14 0.380% 1.369% 0.497% -0.690% 0.040% 0.132%
-13 0.073% 1.114% -0.390% -1.223% 0.178% 0.310%
-12 -0.199% 0.770% -1.262% -2.254% -0.351% -0.041%
-11 -0.816% 0.523% -0.389% -2.412% 0.680% 0.639%
-10 0.784% 1.748% 0.454% -1.929% 0.178% 0.817%
-9 -0.367% 1.179% 0.811% -1.451% -0.117% 0.700%
-8 0.342% 1.248% 0.333% -0.964% -0.388% 0.312%
-7 0.911% 1.570% -0.588% -1.748% -0.809% -0.496%
-6 0.919% 2.066% 0.497% -0.954% 0.062% -0.434%
-5 0.074% 1.555% -0.292% -1.247% -1.073% -1.507%
-4 -0.235% 1.072% 0.883% -0.128% 0.234% -1.273%
-3 -0.090% 1.062% -0.259% -0.545% -1.122% -2.395%
-2 1.619% 2.049% 0.083% -0.491% 0.456% -1.939%
-1 -1.552% -0.076% 0.868% 0.193% -0.541% -2.480%
0 0.050% 0.668% 0.275% 0.361% -0.510% -2.990%
1 0.117% 1.309% -0.510% -0.360% 1.106% -1.884%
2 -0.623% 0.555% 0.338% -0.068% -0.293% -2.177%
3 -0.097% 1.153% 0.304% 0.137% -0.395% -2.573%
4 0.354% 1.342% 0.288% 0.433% -0.124% -2.697%
5 0.369% 1.632% 0.474% 0.853% -0.501% -3.198%
6 0.823% 2.052% 0.153% 1.154% -0.354% -3.552%
7 0.242% 1.813% -0.435% 1.364% -0.399% -3.950%
8 -0.554% 0.282% -0.645% 0.799% -0.187% -4.137%
9 -1.096% -0.729% 0.432% 1.817% -0.175% -4.312%
10 -0.177% -0.779% -0.380% 1.296% -0.205% -4.517%
11 0.316% -0.175% 0.318% 1.978% -0.124% -4.642%
12 0.717% 0.465% 0.881% 3.216% -0.756% -5.398%
13 -0.278% -0.010% 0.243% 3.264% -0.318% -5.715%
14 -0.065% -0.143% 0.154% 3.388% 1.000% -4.715%
15 0.067% -0.072% -0.091% 3.363% 0.309% -4.406%
16 0.114% -0.080% -0.325% 2.921% -1.217% -5.624%
17 0.252% -0.152% -1.361% 1.580% 0.130% -5.494%
18 0.369% -0.183% 0.534% 2.296% 0.006% -5.488%
19 -0.466% -0.911% 0.421% 2.853% -1.028% -6.516%
20 -0.298% -1.855% 0.195% 2.852% 0.851% -5.665%
35

(Table 7 continued)
Fama-French Model (Third Closest Contract, F3)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.336% 0.336% 0.626% 0.626% -0.153% -0.153%
-19 0.137% 0.553% -0.193% 0.114% -0.400% -0.553%
-18 -0.037% 0.599% -0.026% -0.207% 0.011% -0.542%
-17 -1.128% -0.151% -0.302% -0.613% 0.451% -0.091%
-16 0.724% 0.801% -0.269% -0.564% 0.713% 0.622%
-15 -0.180% 0.503% -0.247% -0.993% -0.681% -0.059%
-14 0.583% 1.383% 0.441% -0.539% -0.100% -0.159%
-13 0.145% 0.923% -0.150% -0.855% 0.082% -0.078%
-12 -0.417% 0.380% -0.881% -1.645% -0.262% -0.340%
-11 -0.910% 0.124% -0.327% -1.828% 0.594% 0.255%
-10 0.799% 1.438% 0.637% -1.117% 0.125% 0.380%
-9 -0.217% 0.978% 0.921% -0.590% -0.226% 0.154%
-8 0.289% 0.905% 0.250% -0.324% 0.002% 0.155%
-7 0.765% 1.165% -0.220% -0.755% -0.658% -0.503%
-6 0.872% 1.746% 0.291% -0.444% 0.211% -0.292%
-5 0.243% 1.494% -0.245% -0.673% -0.944% -1.236%
-4 -0.100% 1.044% 0.908% 0.384% 0.347% -0.889%
-3 -0.224% 0.859% -0.327% -0.205% -0.963% -1.852%
-2 1.636% 2.179% 0.232% 0.056% 0.215% -1.637%
-1 -1.536% -0.028% 0.852% 0.625% -0.513% -2.150%
0 0.473% 1.060% 0.255% 0.572% -0.470% -2.620%
1 0.058% 1.064% -0.170% 0.131% 0.918% -1.702%
2 -0.467% 0.640% 0.383% 0.336% -0.343% -2.045%
3 -0.049% 1.112% 0.425% 0.562% -0.360% -2.405%
4 0.323% 1.342% 0.137% 0.552% -0.114% -2.519%
5 0.467% 1.718% 0.520% 1.126% -0.412% -2.932%
6 0.563% 1.749% 0.383% 1.656% -0.247% -3.179%
7 0.093% 1.569% -0.233% 1.717% -0.407% -3.585%
8 -0.542% 0.311% -0.511% 1.135% -0.151% -3.737%
9 -0.998% -0.498% 0.452% 2.133% -0.200% -3.937%
10 -0.347% -0.626% -0.189% 1.717% -0.345% -4.281%
11 0.203% 0.124% 0.609% 2.479% -0.148% -4.429%
12 0.600% 0.638% 1.089% 3.592% -0.682% -5.110%
13 -0.188% 0.322% 0.273% 3.466% -0.266% -5.376%
14 -0.097% 0.201% 0.082% 3.527% 0.869% -4.507%
15 -0.077% 0.163% 0.046% 3.730% 0.291% -4.217%
16 0.031% 0.046% -0.166% 3.491% -0.897% -5.114%
17 0.249% 0.044% -0.910% 2.467% 0.097% -5.017%
18 0.182% -0.135% 0.566% 2.972% -0.073% -5.090%
19 -0.572% -0.792% 0.378% 3.344% -0.776% -5.866%
20 0.017% -1.164% 0.234% 3.411% 0.520% -5.345%
36

(Table 7 continued)
Fama-French Model (Twelfth Closest Contract, F12)
Event OPEC Increase OPEC Decrease OPEC No Change
Day AR CAR AR CAR AR CAR
-20 0.260% 0.260% 0.069% 0.069% -0.216% -0.216%
-19 0.182% 0.494% -0.254% -0.185% -0.136% -0.352%
-18 0.210% 0.661% -0.041% -0.226% 0.136% -0.216%
-17 -0.449% 0.243% 0.303% 0.077% 0.080% -0.136%
-16 0.948% 1.077% -0.096% -0.019% 0.386% 0.250%
-15 0.294% 1.130% 0.061% 0.041% -0.487% -0.237%
-14 0.021% 0.998% 0.355% 0.397% -0.211% -0.448%
-13 0.125% 0.869% 0.025% 0.422% 0.053% -0.395%
-12 -0.464% 0.437% -0.588% -0.166% -0.241% -0.636%
-11 -0.577% 0.282% -0.304% -0.470% 0.438% -0.197%
-10 0.729% 1.202% 0.168% -0.302% -0.057% -0.255%
-9 -0.445% 0.724% 0.973% 0.671% -0.376% -0.630%
-8 0.024% 0.665% 0.090% 0.761% -0.051% -0.681%
-7 0.718% 1.371% -0.364% 0.397% -0.383% -1.064%
-6 0.681% 1.787% 0.334% 0.730% 0.399% -0.665%
-5 0.164% 1.809% -0.152% 0.579% -0.756% -1.422%
-4 -0.070% 1.497% 0.514% 1.093% 0.546% -0.875%
-3 -0.107% 1.502% -0.245% 0.848% -0.726% -1.602%
-2 1.311% 2.524% 0.030% 0.878% 0.244% -1.358%
-1 -1.418% 0.776% 0.660% 1.538% -0.460% -1.818%
0 -0.122% 0.960% -0.246% 1.292% -0.418% -2.236%
1 0.322% 1.819% -0.375% 0.917% 0.567% -1.669%
2 -0.242% 1.536% 0.228% 1.145% -0.494% -2.162%
3 0.028% 1.901% 0.303% 1.448% -0.179% -2.342%
4 0.262% 2.015% -0.114% 1.333% 0.088% -2.253%
5 -0.095% 1.997% 0.904% 2.238% -0.428% -2.681%
6 0.309% 2.306% 0.476% 2.714% -0.227% -2.909%
7 -0.278% 2.033% -0.448% 2.266% -0.298% -3.207%
8 -0.435% 1.303% 0.086% 2.352% -0.015% -3.221%
9 -0.246% 1.280% 0.089% 2.441% -0.120% -3.342%
10 -0.041% 0.929% -0.106% 2.335% -0.436% -3.778%
11 0.018% 1.237% 0.657% 2.992% -0.120% -3.898%
12 0.373% 1.482% 0.690% 3.682% -0.497% -4.395%
13 -0.042% 1.232% 0.004% 3.686% -0.150% -4.545%
14 0.148% 1.306% 0.348% 4.035% 0.733% -3.812%
15 -0.320% 0.863% 0.166% 4.201% 0.457% -3.354%
16 -0.240% 0.567% -0.386% 3.814% -0.676% -4.031%
17 0.023% 0.587% -1.075% 2.740% 0.198% -3.833%
18 0.209% 0.848% 0.540% 3.280% -0.085% -3.918%
19 -0.761% 0.030% 0.171% 3.450% -0.394% -4.312%
20 0.146% -0.019% 0.263% 3.713% 0.448% -3.864%
Table 8. Abnormal and Cumulative Abnormal Returns Around SPR Announcements. (The abnormal
return is calculated using the market model as the normal return measure)
Market Model (Spot Returns) Market Model (Nearby Futures Contract, F1)
37

Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 -0.757% -0.757% -0.037% -0.037% 0.526% 0.526% -0.127% -0.127%
-19 1.178% 0.421% -0.604% -0.641% 0.230% 0.756% 0.090% -0.037%
-18 -0.513% -0.091% -1.626% -2.267% -1.529% -0.773% -1.458% -1.495%
-17 -0.961% -1.053% -0.739% -3.006% -0.064% -0.837% -0.771% -2.266%
-16 -0.487% -1.540% 0.178% -2.828% -0.228% -1.065% 0.373% -1.894%
-15 -0.059% -1.599% 1.167% -1.661% -0.671% -1.736% 1.011% -0.883%
-14 -0.164% -1.762% -0.938% -2.599% 0.643% -1.093% -0.505% -1.388%
-13 -0.054% -1.816% 0.244% -2.355% -0.923% -2.016% 0.214% -1.173%
-12 -0.672% -2.488% -0.117% -2.471% -0.248% -2.264% -0.411% -1.585%
-11 0.061% -2.428% 0.883% -1.588% 0.939% -1.325% 0.407% -1.178%
-10 1.033% -1.394% -0.092% -1.681% 0.838% -0.487% -0.852% -2.030%
-9 -1.917% -3.312% -0.059% -1.740% -1.018% -1.505% -0.675% -2.705%
-8 0.285% -3.026% -1.680% -3.419% -0.687% -2.192% -1.135% -3.840%
-7 -0.975% -4.001% 0.130% -3.289% -0.651% -2.843% -0.047% -3.887%
-6 -1.004% -5.005% -0.020% -3.309% -0.923% -3.766% 0.638% -3.249%
-5 -0.862% -5.867% -0.312% -3.621% -0.696% -4.462% 0.509% -2.739%
-4 0.263% -5.604% -0.430% -4.051% 0.554% -3.908% -0.398% -3.137%
-3 -0.513% -6.116% 0.137% -3.914% 0.376% -3.532% -0.291% -3.428%
-2 -1.118% -7.234% -1.223% -5.137% -0.596% -4.127% 0.562% -2.866%
-1 -0.488% -7.723% 0.514% -4.624% -0.539% -4.666% 0.703% -2.163%
0 -1.228% -8.951% 0.915% -3.709% -1.723% -6.389% 0.134% -2.029%
1 0.943% -8.008% -0.621% -4.330% 0.464% -5.925% -0.544% -2.573%
2 -0.833% -8.841% 0.336% -3.994% -0.331% -6.255% 0.390% -2.182%
3 -0.997% -9.838% -1.336% -5.330% -0.359% -6.614% -1.506% -3.688%
4 1.788% -8.049% -0.424% -5.753% 1.115% -5.499% -0.390% -4.078%
5 0.340% -7.709% -0.774% -6.527% 0.565% -4.934% -0.690% -4.768%
6 0.553% -7.156% 0.171% -6.356% 0.375% -4.560% -0.006% -4.774%
7 0.067% -7.089% -1.108% -7.464% 0.250% -4.309% -0.675% -5.449%
8 0.406% -6.683% 0.873% -6.591% 0.537% -3.773% 0.865% -4.585%
9 -0.744% -7.427% -0.265% -6.856% -0.649% -4.422% -0.289% -4.874%
10 -0.639% -8.066% 0.229% -6.628% -0.442% -4.864% 0.200% -4.673%
11 0.086% -7.981% 0.560% -6.067% 0.102% -4.762% 0.379% -4.295%
12 0.514% -7.467% -0.219% -6.286% 0.473% -4.289% -0.208% -4.503%
13 -0.088% -7.554% 0.782% -5.504% 0.189% -4.100% 0.109% -4.394%
14 -1.377% -8.931% 0.749% -4.754% -0.753% -4.853% 0.357% -4.037%
15 0.830% -8.101% 0.849% -3.906% 0.403% -4.450% -0.049% -4.086%
16 -0.319% -8.420% -0.409% -4.314% -0.126% -4.576% 0.188% -3.898%
17 0.689% -7.731% -1.488% -5.802% -0.154% -4.730% -1.198% -5.096%
18 0.033% -7.698% -1.185% -6.988% 0.582% -4.147% -0.210% -5.307%
19 -1.269% -8.967% -0.248% -7.236% -1.340% -5.488% -0.022% -5.329%
20 -0.625% -9.592% -1.067% -8.302% 0.177% -5.310% -1.170% -6.499%
38

(Table 8 continued)
Market Model (Third Closest Contract, F3) Market Model (Twelfth Closest Contract, F12)
Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 0.427% 0.427% 0.161% 0.161% 0.379% 0.379% 0.419% 0.419%
-19 0.423% 0.850% 0.126% 0.288% 0.376% 0.755% -0.072% 0.347%
-18 -1.097% -0.248% -1.162% -0.874% -0.715% 0.040% -1.025% -0.677%
-17 -0.059% -0.307% -0.564% -1.438% 0.058% 0.098% -0.080% -0.758%
-16 -0.218% -0.525% 0.184% -1.254% -0.472% -0.373% -0.173% -0.930%
-15 -0.351% -0.876% 0.801% -0.453% -0.321% -0.695% 0.570% -0.361%
-14 0.617% -0.259% -0.401% -0.854% 0.604% -0.090% -0.253% -0.613%
-13 -0.852% -1.111% 0.154% -0.700% -0.806% -0.896% 0.019% -0.594%
-12 -0.251% -1.361% -0.379% -1.079% -0.238% -1.135% -0.372% -0.966%
-11 0.829% -0.533% -0.077% -1.156% 0.805% -0.330% -0.636% -1.602%
-10 0.636% 0.103% -0.947% -2.103% 0.122% -0.209% -0.860% -2.463%
-9 -0.949% -0.845% -0.525% -2.627% -0.696% -0.905% -0.447% -2.910%
-8 -0.662% -1.508% -0.538% -3.165% -0.464% -1.369% -0.396% -3.306%
-7 -0.963% -2.471% -0.156% -3.321% -1.101% -2.469% -0.126% -3.432%
-6 -0.880% -3.350% 0.726% -2.595% -0.923% -3.393% 0.570% -2.862%
-5 -0.613% -3.964% 0.224% -2.371% -0.578% -3.971% -0.506% -3.368%
-4 0.601% -3.363% -0.203% -2.573% 0.447% -3.524% -0.005% -3.373%
-3 0.588% -2.775% -0.016% -2.589% 0.535% -2.990% 0.164% -3.208%
-2 -0.583% -3.358% 0.677% -1.912% -0.202% -3.192% 0.515% -2.694%
-1 -0.223% -3.581% 0.608% -1.304% 0.007% -3.185% 0.103% -2.590%
0 -1.705% -5.286% 0.264% -1.040% -1.352% -4.538% -0.141% -2.731%
1 0.095% -5.191% -0.482% -1.521% 0.596% -3.942% -0.489% -3.220%
2 -0.129% -5.321% 0.477% -1.045% -0.156% -4.098% 0.195% -3.025%
3 -0.436% -5.757% -1.191% -2.235% -0.326% -4.424% -0.456% -3.480%
4 0.705% -5.052% -0.260% -2.495% 0.254% -4.170% -0.331% -3.812%
5 0.542% -4.510% -0.449% -2.944% 0.337% -3.833% -0.092% -3.904%
6 0.262% -4.248% 0.138% -2.806% 0.281% -3.552% 0.161% -3.743%
7 0.355% -3.893% -0.604% -3.410% 0.341% -3.211% -0.416% -4.159%
8 0.631% -3.262% 0.796% -2.614% 0.806% -2.405% 0.602% -3.557%
9 -0.587% -3.850% -0.186% -2.800% -0.449% -2.854% -0.054% -3.611%
10 -0.501% -4.351% 0.161% -2.639% -0.462% -3.316% 0.074% -3.537%
11 0.244% -4.107% 0.284% -2.355% 0.254% -3.061% 0.209% -3.328%
12 0.349% -3.758% -0.123% -2.478% 0.201% -2.861% 0.049% -3.279%
13 0.144% -3.614% -0.001% -2.479% 0.020% -2.840% 0.209% -3.070%
14 -0.653% -4.267% 0.157% -2.322% -0.487% -3.328% 0.112% -2.958%
15 0.580% -3.687% -0.355% -2.677% 0.572% -2.755% -0.710% -3.667%
16 -0.248% -3.935% 0.154% -2.523% -0.277% -3.032% 0.107% -3.560%
17 -0.085% -4.020% -1.067% -3.589% -0.110% -3.142% -0.849% -4.409%
18 0.450% -3.570% -0.093% -3.682% 0.386% -2.756% 0.101% -4.308%
19 -0.855% -4.425% -0.107% -3.789% -0.535% -3.290% -0.238% -4.547%
20 0.418% -4.007% -1.085% -4.874% 0.583% -2.708% -0.745% -5.291%
Table 9. Abnormal and Cumulative Abnormal Returns Around SPR Announcements. (The abnormal
return is calculated using the ARCH model as the normal return measure)
39

ARCH Model (Spot Returns) ARCH Model (Nearby Futures Contract, F1)
Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 -0.203% -0.203% 0.982% 0.982% 1.088% 1.088% 0.872% 0.872%
-19 0.105% -0.097% 0.286% 1.268% -0.688% 0.400% 1.028% 1.900%
-18 0.666% 0.569% -1.285% -0.017% -0.402% -0.002% -1.308% 0.591%
-17 -0.257% 0.312% 0.034% 0.018% 0.820% 0.817% 0.011% 0.603%
-16 -1.029% -0.717% 0.041% 0.058% -0.827% -0.009% 0.794% 1.397%
-15 0.020% -0.697% 1.909% 1.967% -0.770% -0.780% 1.930% 3.326%
-14 -0.122% -0.819% -0.720% 1.247% 0.621% -0.158% -0.367% 2.960%
-13 -0.157% -0.976% 1.367% 2.614% -0.875% -1.033% 1.214% 4.174%
-12 -0.641% -1.617% -0.023% 2.591% -0.232% -1.265% 0.015% 4.189%
-11 0.082% -1.535% 0.063% 2.654% 0.982% -0.284% -0.207% 3.982%
-10 0.176% -1.360% -2.155% 0.499% 0.054% -0.230% -2.320% 1.662%
-9 -2.778% -4.138% 0.036% 0.535% -1.792% -2.022% -0.343% 1.318%
-8 0.805% -3.333% 0.406% 0.941% -0.041% -2.062% 0.833% 2.151%
-7 -1.510% -4.843% -0.989% -0.048% -1.189% -3.251% -1.104% 1.047%
-6 -1.249% -6.093% 1.510% 1.462% -1.249% -4.501% 1.787% 2.834%
-5 -0.950% -7.043% 0.755% 2.217% -0.880% -5.380% 1.338% 4.173%
-4 1.680% -5.363% -0.338% 1.878% 1.769% -3.611% -0.182% 3.991%
-3 -0.436% -5.799% 2.851% 4.730% -0.004% -3.615% 2.801% 6.792%
-2 -0.036% -5.835% -0.869% 3.860% 0.607% -3.007% 0.510% 7.302%
-1 -0.112% -5.947% 1.044% 4.905% -0.498% -3.506% 1.034% 8.336%
0 -0.283% -6.229% -6.492% -1.587% -0.920% -4.425% -6.449% 1.887%
1 -2.267% -8.496% -1.372% -2.959% -2.153% -6.578% -0.958% 0.929%
2 0.848% -7.648% 1.617% -1.342% 1.279% -5.300% 1.207% 2.136%
3 -0.569% -8.218% 2.537% 1.195% -0.001% -5.301% 1.117% 3.253%
4 1.189% -7.029% -1.226% -0.031% 0.446% -4.855% -0.362% 2.891%
5 1.495% -5.534% 0.611% 0.580% 1.613% -3.242% -0.418% 2.474%
6 -0.307% -5.841% -0.736% -0.156% -0.578% -3.820% -0.691% 1.782%
7 0.682% -5.158% -3.010% -3.166% 0.738% -3.081% -0.134% 1.648%
8 -0.201% -5.359% 1.166% -2.000% -0.020% -3.101% 1.253% 2.901%
9 -0.126% -5.485% -0.697% -2.696% 0.001% -3.100% -0.815% 2.086%
10 1.302% -4.184% 1.056% -1.640% 1.250% -1.850% 0.924% 3.010%
11 1.136% -3.048% 0.410% -1.230% 1.279% -0.571% 0.607% 3.617%
12 0.439% -2.609% -1.597% -2.827% 0.533% -0.038% -1.413% 2.203%
13 -0.106% -2.715% -1.155% -3.982% 0.184% 0.146% -1.306% 0.898%
14 -2.144% -4.859% 3.364% -0.618% -1.172% -1.026% 2.799% 3.697%
15 1.094% -3.765% 0.155% -0.463% 0.475% -0.552% -0.486% 3.211%
16 -1.660% -5.425% 0.558% 0.095% -1.346% -1.898% 1.017% 4.228%
17 0.782% -4.643% -0.275% -0.180% -0.196% -2.094% 0.112% 4.340%
18 0.169% -4.474% -0.591% -0.771% 0.730% -1.364% 0.102% 4.441%
19 -1.708% -6.182% -0.884% -1.655% -1.741% -3.105% -0.421% 4.020%
20 1.532% -4.649% -1.810% -3.465% 1.987% -1.118% -1.745% 2.275%
40

(Table 9 continued)
ARCH Model (Third Closest Contract, F3) ARCH Model (Twelfth Closest Contract, F12)
Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 0.938% 0.938% 0.863% 0.863% 0.726% 0.726% 0.963% 0.963%
-19 -0.309% 0.629% 0.813% 1.676% -0.172% 0.555% 0.530% 1.492%
-18 -0.128% 0.501% -0.814% 0.861% 0.002% 0.557% -0.787% 0.706%
-17 0.766% 1.266% -0.030% 0.831% 0.650% 1.207% 0.129% 0.835%
-16 -0.720% 0.546% 0.530% 1.361% -0.850% 0.356% 0.179% 1.014%
-15 -0.466% 0.080% 1.555% 2.916% -0.406% -0.049% 1.207% 2.221%
-14 0.655% 0.734% -0.431% 2.485% 0.602% 0.553% -0.365% 1.856%
-13 -0.838% -0.103% 1.014% 3.499% -0.854% -0.301% 0.580% 2.436%
-12 -0.261% -0.364% 0.102% 3.601% -0.269% -0.570% 0.082% 2.518%
-11 0.873% 0.509% -0.476% 3.126% 0.816% 0.246% -0.996% 1.523%
-10 -0.011% 0.498% -1.984% 1.142% -0.366% -0.120% -1.353% 0.170%
-9 -1.583% -1.085% -0.222% 0.920% -1.181% -1.301% -0.077% 0.093%
-8 -0.053% -1.138% 0.604% 1.524% 0.008% -1.293% 0.823% 0.916%
-7 -1.404% -2.542% -0.731% 0.793% -1.440% -2.732% -0.846% 0.070%
-6 -1.136% -3.678% 1.545% 2.338% -1.077% -3.810% 1.085% 1.155%
-5 -0.815% -4.493% 0.733% 3.070% -0.740% -4.549% -0.470% 0.686%
-4 1.633% -2.860% -0.033% 3.037% 1.186% -3.363% 0.051% 0.737%
-3 0.168% -2.692% 1.847% 4.884% 0.180% -3.183% 1.502% 2.239%
-2 0.536% -2.156% 1.014% 5.898% 0.658% -2.526% 0.532% 2.771%
-1 -0.245% -2.401% 0.587% 6.485% -0.014% -2.540% 0.064% 2.835%
0 -0.953% -3.354% -4.522% 1.963% -0.784% -3.323% -2.147% 0.689%
1 -1.911% -5.264% -0.765% 1.198% -0.911% -4.234% -0.333% 0.356%
2 1.190% -4.074% 0.924% 2.122% 0.805% -3.430% 0.594% 0.950%
3 -0.130% -4.204% 0.774% 2.897% -0.086% -3.516% 0.766% 1.716%
4 0.113% -4.091% -0.451% 2.445% -0.234% -3.750% -0.593% 1.123%
5 1.482% -2.609% -0.492% 1.953% 1.071% -2.679% -0.289% 0.834%
6 -0.498% -3.107% -0.496% 1.457% -0.289% -2.968% -0.437% 0.397%
7 0.704% -2.403% 0.056% 1.513% 0.592% -2.376% 0.413% 0.810%
8 0.219% -2.183% 1.099% 2.612% 0.489% -1.887% 0.972% 1.782%
9 0.013% -2.170% -0.733% 1.880% -0.016% -1.902% -0.618% 1.163%
10 0.876% -1.295% 0.795% 2.674% 0.551% -1.351% 0.712% 1.875%
11 1.238% -0.056% 0.499% 3.173% 0.998% -0.354% 0.525% 2.401%
12 0.487% 0.430% -1.094% 2.079% 0.320% -0.034% -0.591% 1.810%
13 0.180% 0.610% -1.167% 0.912% 0.053% 0.018% -0.691% 1.119%
14 -0.978% -0.368% 2.154% 3.066% -0.747% -0.729% 1.590% 2.709%
15 0.644% 0.277% -0.658% 2.408% 0.644% -0.085% -0.722% 1.987%
16 -1.253% -0.976% 0.606% 3.014% -1.028% -1.113% 0.360% 2.347%
17 -0.097% -1.074% 0.174% 3.189% -0.129% -1.242% 0.140% 2.487%
18 0.600% -0.474% 0.140% 3.328% 0.519% -0.723% 0.195% 2.682%
19 -1.218% -1.691% -0.515% 2.813% -0.801% -1.524% -0.488% 2.194%
20 1.930% 0.238% -1.415% 1.398% 1.709% 0.185% -0.807% 1.387%
41

Table 10. Abnormal and Cumulative Abnormal Returns Around SPR Announcements. (The abnormal
return is calculated using the Fama-French model as the normal return measure)
Fama-French Model (Spot Returns) Fama-French Model (Nearby Futures Contract, F1)
Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 -0.375% -0.375% 0.643% 0.643% 0.942% 0.942% 0.358% 0.358%
-19 0.058% -0.317% 0.615% 1.258% -0.803% 0.139% 1.152% 1.511%
-18 1.283% 0.967% -1.140% 0.118% 0.644% 0.783% -1.133% 0.378%
-17 0.748% 1.715% -0.094% 0.024% 1.519% 2.302% -0.202% 0.176%
-16 -0.686% 1.029% 0.149% 0.173% -0.513% 1.789% 0.886% 1.062%
-15 0.466% 1.495% 2.193% 2.367% -0.274% 1.515% 2.005% 3.067%
-14 0.295% 1.790% -1.208% 1.159% 1.134% 2.648% -0.640% 2.427%
-13 -0.008% 1.783% 0.715% 1.874% -0.524% 2.125% 0.588% 3.015%
-12 -0.919% 0.863% 0.384% 2.258% -0.395% 1.730% 0.490% 3.506%
-11 -0.616% 0.248% -0.412% 1.846% 0.761% 2.491% -0.286% 3.220%
-10 -0.092% 0.155% -2.547% -0.701% -0.070% 2.421% -2.509% 0.711%
-9 -1.783% -1.627% 0.155% -0.546% -1.140% 1.281% -0.251% 0.460%
-8 1.246% -0.381% -0.200% -0.746% -0.021% 1.260% 0.331% 0.792%
-7 -0.764% -1.146% -1.480% -2.225% -0.601% 0.660% -1.581% -0.790%
-6 -0.213% -1.359% 0.508% -1.718% -0.535% 0.125% 1.104% 0.314%
-5 -0.558% -1.917% 1.120% -0.598% -0.802% -0.677% 1.390% 1.704%
-4 1.418% -0.499% -0.474% -1.072% 1.317% 0.640% -0.267% 1.437%
-3 -0.900% -1.398% 2.006% 0.934% -1.009% -0.369% 1.790% 3.226%
-2 -1.273% -2.672% -1.104% -0.170% 0.171% -0.198% 0.109% 3.335%
-1 0.384% -2.288% 1.332% 1.162% -0.294% -0.492% 1.273% 4.608%
0 -0.454% -2.742% -4.280% -3.118% -1.049% -1.540% -4.787% -0.179%
1 -2.917% -5.659% -1.210% -4.329% -2.775% -4.315% -1.179% -1.358%
2 1.559% -4.100% 1.483% -2.846% 1.824% -2.491% 1.198% -0.160%
3 -0.354% -4.454% 2.202% -0.644% 0.587% -1.904% 1.102% 0.942%
4 0.853% -3.601% -0.601% -1.245% 0.192% -1.712% 0.402% 1.344%
5 1.481% -2.120% 1.789% 0.544% 1.346% -0.366% 0.790% 2.135%
6 -0.024% -2.144% -0.184% 0.360% -0.553% -0.920% -0.134% 2.001%
7 -0.052% -2.197% -2.671% -2.310% 0.649% -0.270% 0.379% 2.380%
8 -0.948% -3.145% 0.911% -1.400% -0.641% -0.911% 1.195% 3.575%
9 -0.100% -3.245% 0.474% -0.926% 0.086% -0.825% 0.414% 3.989%
10 1.256% -1.989% 1.770% 0.844% 1.136% 0.312% 1.683% 5.672%
11 0.973% -1.016% 0.248% 1.092% 1.350% 1.662% 0.672% 6.344%
12 1.370% 0.354% -0.689% 0.402% 1.071% 2.733% -0.310% 6.034%
13 0.122% 0.477% -0.362% 0.040% 0.742% 3.475% -0.726% 5.308%
14 -2.175% -1.698% 3.997% 4.037% -1.008% 2.467% 3.174% 8.482%
15 0.361% -1.337% 0.110% 4.148% -0.224% 2.243% -0.668% 7.814%
16 -1.976% -3.314% 0.808% 4.955% -1.412% 0.831% 0.794% 8.608%
17 0.728% -2.585% 1.386% 6.341% -0.002% 0.829% 1.559% 10.167%
18 0.089% -2.497% -1.171% 5.170% 0.939% 1.769% -0.086% 10.082%
19 -2.143% -4.640% -0.351% 4.819% -1.837% -0.069% 0.121% 10.202%
20 1.574% -3.066% -2.378% 2.441% 1.938% 1.869% -2.207% 7.996%
42

(Table 10 continued)
Fama-French Model (Third Closest Contract, F3) Fama-French Model (Twelfth Closest Contract, F12)
Event SPR Increase SPR Decrease SPR Increase SPR Decrease
Day AR CAR AR CAR AR CAR AR CAR
-20 0.872% 0.872% 0.446% 0.446% 0.732% 0.732% 0.835% 0.835%
-19 -0.372% 0.500% 0.840% 1.286% -0.108% 0.625% 0.623% 1.458%
-18 0.825% 1.325% -0.698% 0.589% 0.967% 1.592% -0.814% 0.644%
-17 1.227% 2.552% -0.267% 0.322% 0.896% 2.488% -0.098% 0.546%
-16 -0.602% 1.950% 0.551% 0.874% -0.967% 1.521% 0.242% 0.788%
-15 -0.164% 1.786% 1.564% 2.437% -0.191% 1.329% 1.207% 1.995%
-14 1.003% 2.789% -0.699% 1.738% 0.942% 2.271% -0.662% 1.333%
-13 -0.499% 2.290% 0.445% 2.184% -0.485% 1.786% 0.171% 1.504%
-12 -0.322% 1.968% 0.614% 2.798% -0.341% 1.445% 0.341% 1.845%
-11 0.693% 2.661% -0.469% 2.329% 0.628% 2.072% -1.086% 0.759%
-10 -0.170% 2.490% -2.087% 0.241% -0.451% 1.621% -1.486% -0.727%
-9 -1.143% 1.347% -0.164% 0.078% -0.976% 0.645% -0.103% -0.831%
-8 -0.040% 1.308% 0.236% 0.314% -0.075% 0.570% 0.621% -0.209%
-7 -0.965% 0.343% -1.155% -0.841% -1.162% -0.592% -1.013% -1.222%
-6 -0.633% -0.290% 0.987% 0.146% -0.860% -1.451% 0.619% -0.603%
-5 -0.812% -1.103% 0.721% 0.867% -0.770% -2.222% -0.427% -1.029%
-4 1.229% 0.126% -0.145% 0.722% 0.840% -1.382% -0.032% -1.062%
-3 -0.909% -0.782% 0.943% 1.665% -0.871% -2.253% 1.052% -0.009%
-2 0.086% -0.696% 0.573% 2.238% 0.493% -1.760% 0.242% 0.233%
-1 -0.112% -0.808% 0.870% 3.109% 0.179% -1.581% 0.338% 0.571%
0 -1.056% -1.864% -3.219% -0.110% -0.719% -2.300% -1.148% -0.577%
1 -2.382% -4.246% -1.102% -1.212% -1.135% -3.435% -0.424% -1.001%
2 1.759% -2.487% 0.920% -0.292% 1.365% -2.070% 0.443% -0.558%
3 0.219% -2.268% 0.774% 0.483% 0.001% -2.069% 0.502% -0.056%
4 -0.068% -2.336% 0.164% 0.646% -0.268% -2.337% -0.331% -0.388%
5 1.097% -1.238% 0.582% 1.228% 0.659% -1.678% 0.405% 0.017%
6 -0.580% -1.819% 0.088% 1.316% -0.371% -2.049% -0.174% -0.157%
7 0.685% -1.133% 0.488% 1.805% 0.781% -1.268% 0.517% 0.360%
8 -0.292% -1.426% 1.073% 2.877% 0.152% -1.115% 0.773% 1.132%
9 0.024% -1.402% 0.338% 3.216% 0.150% -0.965% -0.005% 1.127%
10 0.738% -0.664% 1.416% 4.632% 0.433% -0.532% 0.911% 2.038%
11 1.310% 0.647% 0.479% 5.110% 1.094% 0.562% 0.062% 2.100%
12 0.892% 1.538% -0.221% 4.889% 0.616% 1.178% -0.301% 1.798%
13 0.621% 2.159% -0.695% 4.194% 0.516% 1.694% -0.535% 1.263%
14 -0.810% 1.349% 2.457% 6.651% -0.591% 1.103% 1.878% 3.142%
15 0.035% 1.384% -0.863% 5.788% 0.411% 1.513% -0.835% 2.306%
16 -1.344% 0.040% 0.419% 6.207% -0.958% 0.555% 0.347% 2.653%
17 0.071% 0.111% 1.339% 7.546% 0.117% 0.672% 0.968% 3.620%
18 0.845% 0.955% 0.011% 7.557% 0.911% 1.583% -0.094% 3.526%
19 -1.270% -0.314% -0.091% 7.467% -0.771% 0.812% -0.323% 3.203%
20 1.867% 1.552% -1.810% 5.657% 1.636% 2.448% -1.297% 1.906%
43