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The impact of natural disasters on the stock returns and volatilities of local firms

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  • Bourdeau-Brien, Michael
  • Kryzanowski, Lawrence

Abstract

This paper examines the impact of major natural disasters on the stock returns and volatilities of U.S. firms. We find that a small proportion of catastrophes have a significant impact on returns, after controlling for false discoveries. The meaningful shocks are confined to firms based in disaster areas and are distributed over a relatively long period of time. The uttermost effects are felt in the two or three months following the peak of disaster news coverage. We observe that the second moments of local stock returns more than double when hurricanes, floods, winter storms and episodes of extreme temperature occur.

Suggested Citation

  • Bourdeau-Brien, Michael & Kryzanowski, Lawrence, 2017. "The impact of natural disasters on the stock returns and volatilities of local firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 259-270.
    • Handle: RePEc:eee:quaeco:v:63:y:2017:i:c:p:259-270
    DOI: 10.1016/j.qref.2016.05.003
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    22. Donadelli, M. & Jüppner, M. & Paradiso, A. & Ghisletti, M., 2020. "Tornado activity, house prices, and stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).

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    More about this item

    Keywords

    Natural disasters; Stock returns; Return volatility; GARCH;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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