Intraday Study of the Market Reaction to Distributed Denial of Service (DOS) Attacks on Internet Firms

By Rao, Arundhati; Warsame, Mohamed et al. | Academy of Accounting and Financial Studies Journal, April 2011 | Go to article overview

Intraday Study of the Market Reaction to Distributed Denial of Service (DOS) Attacks on Internet Firms


Rao, Arundhati, Warsame, Mohamed, Williams, Jan L., Academy of Accounting and Financial Studies Journal


INTRODUCTION

Computers have become an integral part of our personal and professional lives. Some companies in fact conduct all of their business solely through the use of computers; these firms are referred to as "internet firms." Denial of access to computer networks even for a brief period of time can result in a loss of business and can be devastating to internet firms. Distributed denial of service (DoS) attacks on internet firms encompass all conditions that deliberately prevent users from accessing network resources through which the firms conduct business, including the sale and purchase of products and access to data for various reasons. The attacks may also go beyond shutting down websites; it may damage computer software and systems, and compromise firm and customer data.

During a DoS attack, internet firms lose revenue and also suffer the consequences of exposure to their inherent "vulnerability" with permanent loss of future revenue (some customers shy away from internet businesses after news of a hacker attack). Using e-Bay as an example, Duh et al. (2002) show that concern over online security is a major impediment to the growth of internet businesses. They find that DoS, privacy, and authentication are three major sources of business risk for internet firms.

The impact of DoS attacks on market reaction remains questionable. Several studies have examined the market reaction of such attacks; the findings, however, are inconclusive. Hovav and D'Arcy (2003) and Hovav, Andoh-Baidoo and Dhillion (2007) find that the market does not significantly penalize internet companies that experience a DoS attack. Ettredge and Richardson (2003), Cavusoglu, Mishra and Raghunathan (2004), and Anthony, Choi and Grabski (2006), on the other hand, find a negative market reaction to internet firms that experience web outages. Each of these studies used an event study methodology and daily returns data. Telang and Wattal's (2007) examination of the impact of vulnerability announcements on security software vendors reveals that these companies do suffer a drop in their stock prices.

The purpose of this study is to further examine the relation between DoS attacks and market reaction. We build on the study by Ettredge and Richardson (2003) and examine the effects of the same DoS attacks at an intraday level using data obtained from the NASTRAQ database. Using intraday data further allows us to investigate the extent to which the DoS victim's stock prices are affected and the related length of time. Additionally, we analyze the impact of DoS attacks on other firms in the same industry by way of information transfer. We hypothesize that a DoS victim's stock will trade heavily; this increase in trading volume will become "news" resulting in an increase in trading of other stocks in the same industry. Furthermore, we examine the extent to which a DoS attack affects the stock price of Internet Security Provider (ISP) firms at an intraday level.

Our study advances the current knowledge of literature by using intraday data. This data is advantageous since the NASDAQ market price adjusts rapidly to new information on DoS attacks. The NASTRAQ database, which is intended for academic research, contains trades and quotes for NASDAQ stocks. The data must be extracted into spreadsheets. This poses a major difficulty with the large volume of trading data within the short window of interest in this paper. The seminal paper by Ball and Brown (1968) shows that the market does not adjust fully to new information and leads to a post announcement drift. Therefore, we examine the market adjustment to a DoS attack, on an intraday basis as trading occurs, and the cost of security in terms of price adjustment to firms in the industry that have not been attacked. Another significant contribution of this research will be the study of information transfer based on trading volume.

LITERATURE REVIEW

The rational pricing and market value of internet firms has been studied extensively.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Intraday Study of the Market Reaction to Distributed Denial of Service (DOS) Attacks on Internet Firms
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.