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Tornado activity, house prices, and stock returns

M. Donadelli, Marcus Jüppner (), Antonio Paradiso () and M. Ghisletti

The North American Journal of Economics and Finance, 2020, vol. 52, issue C

Abstract: In this paper we investigate the effects of tornado activity on house prices and stock returns in the US. First, using geo-referenced and metropolitan statistical area (MSA)-level data, we find tornado activity to be responsible for a significant drop in house prices. Spillover tornado effects between adjacent MSAs are also detected. Furthermore, our granular analysis provides evidence of tornadoes having a negative impact on stock returns. However, only two sectors seem to contribute to such a negative effect (i.e., consumer discretionary and telecommunications). In a macro-analysis, which relies on aggregate data for the South, West, Midwest and Northeast US regions, we then show that tornado activity generates a significant drop in house prices only in the South and Midwest. In these regions, tornadoes are also responsible for a drop in income. Tornado activity is finally found to positively (negatively) affect stock returns in the Midwest (South). If different sectors are examined, a more heterogeneous picture emerges.

Keywords: Tornadoes; House prices; Stock returns (search for similar items in EconPapers)
JEL-codes: E30 Q56 R20 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940820300590

DOI: 10.1016/j.najef.2020.101162

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