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Catastrophic Shocks and Capital markets: A Comparative Analysis by Disaster and Sector

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Abstract

This paper provides an analysis of the impact of natural, industrial and terrorist disasters on the Australian capital market using the Box and Tiao intervention analysis and the data on daily returns in the following ten market sectors: consumer discretionary, consumer staples, energy, financial, health care, industrial, information technology, materials, telecommunication services and utilities. Inter alia, we have found that the shocks provided by natural disasters have an influence on market sector returns, depending upon the sector in question. The sectors most sensitive to disasters of any type are the consumer discretionary, financial services and materials sectors while the most significant single event during the past eight years would appear to be the September 11 terrorist attack, at least in terms of its impact upon the capital market.

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  • Worthington, Andrew & Valadkhani, Abbas, 2005. "Catastrophic Shocks and Capital markets: A Comparative Analysis by Disaster and Sector," Economics Working Papers wp05-20, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp05-20
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012203.pdf
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    1. Andrew Worthington & Abbas Valadkhani, 2004. "Measuring the impact of natural disasters on capital markets: an empirical application using intervention analysis," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2177-2186.
    2. St Pierre, Eileen F, 1998. "The Impact of Option Introduction on the Conditional Return Distribution of Underlying Securities," The Financial Review, Eastern Finance Association, vol. 33(1), pages 105-118, February.
    3. Ada Ho & Alan Wan, 2002. "Testing for covariance stationarity of stock returns in the presence of structural breaks: an intervention analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 9(7), pages 441-447.
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    1. repec:eee:riibaf:v:41:y:2017:i:c:p:556-576 is not listed on IDEAS
    2. Ramiah, Vikash & Cam, Marie-Anne & Calabro, Michael & Maher, David & Ghafouri, Shahab, 2010. "Changes in equity returns and volatility across different Australian industries following the recent terrorist attacks," Pacific-Basin Finance Journal, Elsevier, vol. 18(1), pages 64-76, January.

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    Keywords

    Intervention Analysis; Capital Markets; Natural Disasters;

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