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The Impact of Natural Disasters on Risk Preference in Financial Investment

In: Proceedings of the 2025 10th International Conference on Financial Innovation and Economic Development (ICFIED 2025)

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  • Ziling Ren

    (University of Macau)

Abstract

This research examines the impact of natural disasters on risk preferences of financial investments, highlighting significant behavioral changes during such events. By utilizing a comprehensive dataset combining Peer-to-Peer (P2P) investment data in the United States from 2005 to 2008 with recorded natural disasters, we apply OLS regression technique to ascertain the shifts in financial behaviors, especially focusing on the Borrower Maximum Rate. The analysis reveals that natural disasters notably increase financial risk aversion, compelling investors to choose higher interest rates to minimize potential losses. Moreover, this research also explores the influence of socioeconomic factors such as race to risk preferences, showing that black borrowers generally face higher rates. These findings underscore the sensibility of financial markets to external shocks. The implications of this research are crucial for policymakers and financial institutions aiming to forge more resilient economic systems in the face of natural disasters.

Suggested Citation

  • Ziling Ren, 2025. "The Impact of Natural Disasters on Risk Preference in Financial Investment," Advances in Economics, Business and Management Research, in: Maizaitulaidawati Md Husin & Tomoki Fujii & Xiaodong Lai & Azlina Binti Md Yassin (ed.), Proceedings of the 2025 10th International Conference on Financial Innovation and Economic Development (ICFIED 2025), pages 389-396, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-702-1_42
    DOI: 10.2991/978-94-6463-702-1_42
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