Measuring the impact of natural disasters on capital markets: an empirical application using intervention analysis

Worthington, Andrew C.; Valadkhani, Abbas

doi:10.1080/0003684042000282489

Cited by 135 publications

(91 citation statements)

References 15 publications

(16 reference statements)

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“…Cagle (1996) concluded that South Carolina's Hurricane Hugo [insured loss USD4.2 billion] caused a significant negative price reaction for insurers with high exposure and unaffected those with low exposure. Lastly at an aggregate level Worthington and Valadkhani (2004) have recently examined the impact and duration of natural disaster effects on the Australian equity market. The present study is in fact an extension of the work by Worthington and Valadkhani (2004) in that it quantifies such effects on the daily returns within various sectors in Australia's capital markets.…”

Section: Introductionmentioning

confidence: 99%

“…Accordingly, the purpose of this paper is to model the market sector impacts of catastrophes in Australia. Apart from the work by Worthington and Valadkhani (2004), the current study is believed to be the first financial study of disasters and catastrophes to use intervention analysis in an autoregressive moving average (ARMA) framework, and one of few studies of the financial impacts of disasters and catastrophes outside the United States. The paper itself is divided into four main areas.…”

Section: Introductionmentioning

confidence: 99%

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

Worthington

Valadkhani

2005

Global Economic Review

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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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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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

Worthington

Valadkhani

2005

Global Economic Review

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“…Worthington and Valadkhani (2004) find that bushfires have significant positive impact on the capital market return of Australia while cyclones have considerable negative impact on the market return. Besides, earthquake has mixed impact overall.…”

Section: Introductionmentioning

confidence: 92%

“…Some studies tried to explore the relationship between natural disaster and economic growth (see, for example, Benson & Clay, 2004;Cavallo & Noy, 2010;Kim, 2011;Wang & Kutan, 2013). Some studies tried to examine the linkage between natural disaster and capital market movement (see, Luo, 2012;Worthington, 2008;Worthington & Valadkhani, 2004) and some studies tried to examine the contagion effect in other market due to economic and financial shocks (see, Chiang, Jeon, & Li, 2007;Forbes & Rigobon, 2002;Khan & Park, 2009;Palamalai, Kalaivani, & Devakumar, 2013), but there is no study which examines the impact of natural disaster to the global markets. All those studies concentrate on different natural disasters of the world irrespective of country-specific consideration.…”

Section: Introductionmentioning

confidence: 99%

“…Financial loss of natural disaster only accounts direct financial loss of individual and enterprise where market price of assets is the mode of cost-benefit analysis (Worthington, 2008). Environmental shocks have sector-sensitive influence to the stock market return of Australia (Worthington & Valadkhani, 2005) where bushfires, cyclone and earthquakes have major adverse impact to the market return compared to storm and flood (Worthington & Valadkhani, 2004). Australia is the 13th largest economy in the world according to nominal GDP in 2015 with the 7th highest per capita GDP in 2015 (International Monetary Fund World Economic Outlook, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Effect of catastrophic disaster in financial market contagion

Siddikee

Rahman

2017

Cogent Economics & Finance

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Abstract:The study examined the contagion effect of financial market volatility from Australian capital market to Indian, New Zealand, Hong Kong, Chinese, Taiwan, and Japanese capital markets due to Australian catastrophe. In the first stage, we employed two-variable vector autoregression (VAR) model for calculating the residuals of the daily index return. In the second stage, we used adjusted correlation coefficient for detecting the significant increase in correlation coefficient of the VAR residuals after the catastrophes. Finally, Fishers r to z transformation was used for identifying contagion. After Victoria bushfire, a significant increase in the adjusted correlation coefficient of Australia with India and Hong Kong and their respective z > +1.96 validates contagion. The adjusted correlation coefficient of Australia with China and Japan increased after the Victoria bushfire but the z < +1.96 with (p > 0.05) does not confirm contagion, but rather exposed the persistence of high economic linkage. Apart from this, a significant decrease in the correlation coefficients with New Zealand is evident with corresponding z < −1.96 and (p < 0.05) advocates low economic linkage among them. After New South Wales (NSW) bushfire, contagion

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The impact of natural disaster shocks on business confidence level and Istanbul Stock Exchange: A wavelet coherence approach

Toguç,

Kuşkaya,

Magazzino

et al. 2023

Geological Journal

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The focus of this study is to examine the short‐ and long‐term causal effects of natural disaster shocks on the stock market and business confidence level in the time‐frequency domain by studying the co‐movements between earthquake data and the Istanbul Stock Index closing prices, using the Wavelet Coherence and Phase Difference analyses. The empirical findings reveal that the relationship between earthquake events and financial markets is not stable over time and across different time horizons. The linkage becomes stronger in the long term when the impact of the earthquake event coincides with a financial crisis reflecting a combined effect. This nexus is also strong during the years 2007–2011 reflecting a similar combined effect of both an earthquake event and the global financial crisis. Meanwhile, co‐movement between the earthquake and the financial market index implies a negative effect in the period 2011–2012, indicating short‐run effects of stock market shocks. Differentiating these short‐term and long‐term effects has implications for risk management and policymaking.

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Measuring the impact of natural disasters on capital markets: an empirical application using intervention analysis

Cited by 135 publications

References 15 publications

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

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

Effect of catastrophic disaster in financial market contagion

The impact of natural disaster shocks on business confidence level and Istanbul Stock Exchange: A wavelet coherence approach

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