Natural Disasters and Asset Prices: Evidence from Winter Storm Uri
61 Pages Posted: 18 Aug 2023 Last revised: 23 Aug 2023
Date Written: August 23, 2023
Abstract
We investigate the impact of natural disasters on asset prices by leveraging the unprecedented nature of Winter Storm Uri through a difference-in-differences approach. Our proxy for the treatment is the proportion of employment located in Texas, the region most affected by the storm. Our paper reveals a substantial reduction in abnormal returns for firms with a significant workforce presence in Texas after Winter Storm Uri. Firms from sectors heavily reliant on fixed assets and lacking labor force flexibility experience notably greater declines in abnormal returns relative to firms from others. Our findings underscore the significance of production-related fundamentals in asset pricing.
Keywords: Natural Disasters, Asset Prices, Production Flexibility, Work from Home
JEL Classification: G12, G14, G32
Suggested Citation: Suggested Citation