Market Response of US Equities to Domestic Natural Disasters: Industry-Based Evidence

Accounting and Finance (Forthcoming)

34 Pages Posted: 10 Sep 2018 Last revised: 9 May 2019

See all articles by Ihtisham Malik

Ihtisham Malik

University of Queensland - Business School; University of Queensland

Robert W. Faff

University of Queensland

Kam Fong Chan

University of Queensland - Faculty of Business, Economics and Law; Financial Research Network (FIRN)

Abstract

This study investigates US industry-based price response to domestic natural disasters over the period 1960-2015. Using an event study methodology, we estimate pre, during and post disaster impacts and document a slower response in pre-disaster period than in post-disaster period. We further find that industries react differently to the same disaster and that reactions are not always negative. For example, meteorological disasters have a positive (negative) market impact on Gold (Banking). Moreover, we provide evidence that not every industry responds similarly to different disasters e.g. Gold reacts positively (negatively) to meteorological (geophysical) disasters. As such, we identify key “winner” and “loser” industries in the event of respective natural disasters, which is suggestive of safer investment opportunities to investors sensitive to the prospect of future similar scenarios.

Keywords: Natural Disasters, Industry Portfolios, Market Reaction

JEL Classification: G10, G14, Q54

Suggested Citation

Malik, Ihtisham and Faff, Robert W. and Chan, Kam Fong, Market Response of US Equities to Domestic Natural Disasters: Industry-Based Evidence. Accounting and Finance (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3239224 or http://dx.doi.org/10.2139/ssrn.3239224

Ihtisham Malik (Contact Author)

University of Queensland - Business School ( email )

St Lucia, Queensland 4067
Australia

University of Queensland ( email )

St Lucia QLD 4072, Australia
Brisbane, Queensland
Australia

Robert W. Faff

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Kam Fong Chan

University of Queensland - Faculty of Business, Economics and Law ( email )

4072 Brisbane, Queensland
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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