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The Market Valuation and Trading Volume Effects of the Creation of the Florida Hurricane Catastrophe Fund on Property‐liability Insurers

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  • Carl Pacini
  • David C. Marlett

Abstract

The Florida Hurricane Catastrophe Fund was officially created in November, 1993. This study analyzes investor reactions during the creation of the Florida Hurricane Catastrophe Fund. We find significant share price reactions for four of six legislative events consistent with the predictions of the theory outlined. We use both a generalized least squares portfolio approach and Corrado's (1989) rank statistic, a nonparametric event study methodology, to arrive at our findings. Empirical analysis of trading volume corroborates the findings involving share price reactions. We also find that the market is able to discriminate between property‐liability insurers on the basis of hurricane exposure and firm size.

Suggested Citation

  • Carl Pacini & David C. Marlett, 2001. "The Market Valuation and Trading Volume Effects of the Creation of the Florida Hurricane Catastrophe Fund on Property‐liability Insurers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(3‐4), pages 407-445, April.
    • Handle: RePEc:bla:jbfnac:v:28:y:2001:i:3-4:p:407-445
    DOI: 10.1111/1468-5957.00379
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    Cited by:

    1. Carl Pacini & William Hillison & David Marlett & Deanna Burgess, 2005. "Corporate governance and the market impact of the Financial Services Modernization act of 1999 on bank returns and trading volume," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(1), pages 46-72, March.
    2. Riccardo Ferretti & Pierpaolo Pattitoni & Anna Salinas, 2015. "The effectiveness of insider trading regulations: The case of the Italian tender offers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 15309, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    3. Si, Deng-Kui & Li, Xiao-Lin & Xu, XuChuan & Fang, Yi, 2021. "The risk spillover effect of the COVID-19 pandemic on energy sector: Evidence from China," Energy Economics, Elsevier, vol. 102(C).
    4. Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2016. "Market Abuse Directive and Insider Trading: Evidence from Italian Tender Offers," Working Paper series 16-16, Rimini Centre for Economic Analysis.
    5. Riccardo Ferretti & Pierpaolo Pattitoni & Anna Salinas, 2015. "The effectiveness of insider trading regulations: The case of the Italian tender offers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0057, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    6. Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2021. "Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 461-485, November.

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