IDEAS home Printed from https://ideas.repec.org/a/wsi/ccexxx/v14y2023i02ns2010007823500069.html
   My bibliography  Save this article

An Examination Of Market Reaction When Negative Emotions Run High Amidst A Tropical Cyclone

Author

Listed:
  • CHUN-I LEE

    (Department of Finance, Loyola Marymount University, Los Angeles, California, USA)

  • CHUEH-YUNG TSAO

    (��Department of Industrial and Business Management, Chang Gung University, No. 259 Wenhua 1st Rd., Guishan District, Taoyuan City 33302, Taiwan)

Abstract

We find evidence of negative returns, greater volatility, higher turnover, and lower liquidity around a tropical cyclone. Before the land warnings are issued, there is significant under-reaction by investors. Throughout the storm, market volatility increases with negative returns. This leverage effect is similarly present in liquidity before and after the storm. The abnormal returns, volatility, and activities are not related to the characteristics of the storm and exist after the weather effect and various determinants have been accounted for. These findings strongly suggest that underlying all the negative market reaction is the prevalent emotional distress, anxiety, and fear among investors evoked by the destructive and deadly forces of the storm. These negative emotions presumably are stronger when faced with stronger storms and may be managed with better preparedness. This is indeed the case given that we find evidence of more significant market reaction to moderate and severe typhoons and in the early years than in recent years.

Suggested Citation

  • Chun-I Lee & Chueh-Yung Tsao, 2023. "An Examination Of Market Reaction When Negative Emotions Run High Amidst A Tropical Cyclone," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 1-33, May.
    • Handle: RePEc:wsi:ccexxx:v:14:y:2023:i:02:n:s2010007823500069
    DOI: 10.1142/S2010007823500069
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2010007823500069
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2010007823500069?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Market reaction; tropical cyclone; behavior finance;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ccexxx:v:14:y:2023:i:02:n:s2010007823500069. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/cce/cce.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.