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Investor response to a natural disaster: Evidence from Japan's 2011 earthquake

  • Hood, Matthew
  • Kamesaka, Akiko
  • Nofsinger, John
  • Tamura, Teruyuki
Registered author(s):

    Japan's most powerful known earthquake struck at 2:46p.m. on Friday, March 11, 2011. We study the unusual trading behaviors of individual and foreign investors in Japan during the aftermath of this natural disaster. Individual investors typically show contrarian trading patterns, so the sharp downturn in the Nikkei should cause positive net purchases. Instead, purchases were significantly less than sales in the week after the earthquake. Foreign investors typically show positive feedback and momentum trading patterns. However, in the week after the earthquake, they seemed to have stabilized the Japanese stock markets by dramatically increasing their trading activity and net purchases.

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    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 25 (2013)
    Issue (Month): C ()
    Pages: 240-252

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    Handle: RePEc:eee:pacfin:v:25:y:2013:i:c:p:240-252
    Contact details of provider: Web page: http://www.elsevier.com/locate/pacfin

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    1. Andrew Worthington & Abbas Valadkhani, 2003. "Measuring the impact of natural disasters on capital markets: An empirical application using intervention analysis," School of Economics and Finance Discussion Papers and Working Papers Series 154, School of Economics and Finance, Queensland University of Technology.
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    7. Grinblatt, Mark & Keloharju, Matti, 2000. "The investment behavior and performance of various investor types: a study of Finland's unique data set," Journal of Financial Economics, Elsevier, vol. 55(1), pages 43-67, January.
    8. Kim, Kenneth A. & Nofsinger, John R., 2001. "Institutional Herding, Business Groups, and Economic Regimes: Evidence from Japan," CEI Working Paper Series 2001-16, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    9. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
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    11. Kamesaka, Akiko & Nofsinger, John R. & Kawakita, Hidetaka, 2003. "Investment patterns and performance of investor groups in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 11(1), pages 1-22, January.
    12. Choe, Hyuk & Kho, Bong-Chan & Stulz, Rene M., 1999. "Do foreign investors destabilize stock markets? The Korean experience in 1997," Journal of Financial Economics, Elsevier, vol. 54(2), pages 227-264, October.
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    15. Akiko Kamesaka, 2013. "The Great East Japan Earthquake and Investor Behavior in Japan's Equity Markets," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(1), pages 71-86, January.
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