Do Typhoons Make Property-Liability Insurers’ Stock Prices Turbulent?
Kobe University - Graduate School of Business Administration
March 14, 2014
The aim of this paper is to clarify how natural disasters influence the stock prices of property-liability insurance companies. Examining a series of typhoons that made landfall in Japan, this study finds the following. First, the stock prices of property-liability insurers, on average, increase around typhoon landfalls. Second, a property-liability insurer’s stock price reacts more positively around typhoons that have greater precipitation and more negatively around typhoons with longer intervals from the previous typhoon landfall or that cause more serious residential damage. Third, a property-liability insurer’s stock price reacts according to its profitability or business efficiency. These results are consistent with the hypothesis that market reaction to property-liability insurers depends on whether the total amount of insurance claims from a natural disaster exceeds investors’ expectations of additional insurance demand.
Number of Pages in PDF File: 41
Keywords: stock performance, natural disaster, typhoon, event study, property-liability insurers, stock market
JEL Classification: G14, G15, G22working papers series
Date posted: April 22, 2012 ; Last revised: March 14, 2014
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