Natural Disasters and Asset Prices: Evidence from Winter Storm Uri

61 Pages Posted: 18 Aug 2023 Last revised: 23 Aug 2023

See all articles by Dong Cheng

Dong Cheng

Union College

Nam T. Vu

Miami University of Ohio - Department of Economics

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

Cheng, Dong and Vu, Nam T., Natural Disasters and Asset Prices: Evidence from Winter Storm Uri (August 23, 2023). Available at SSRN: https://ssrn.com/abstract=4542858 or http://dx.doi.org/10.2139/ssrn.4542858

Dong Cheng (Contact Author)

Union College ( email )

807 Union Street
Schenectady, NY 12308
United States

HOME PAGE: http://www.dongcarlcheng.com

Nam T. Vu

Miami University of Ohio - Department of Economics ( email )

208 Laws Hall
Oxford, OH 45056
United States

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