Market anomalies and disaster risk: Evidence from extreme weather events

Matthew G. Lanfear, Abraham Lioui and Mark G. Siebert

Journal of Financial Markets, 2019, vol. 46, issue C

Abstract: We document strong abnormal effects due to U.S. landfall hurricanes over the period 1990 to 2017 on stock returns and illiquidity across portfolios of stocks sorted by market equity (ME), book-to-market equity ratio (BE/ME), momentum, return-on-equity (ROE), and investment-to-assets (I/A). ROE- and I/A-related long/short factors are insensitive to hurricanes, while size-, BE/ME-, and momentum-related factors are extremely sensitive to these extreme weather events. Long and short legs react differently and high momentum stocks experience a negative impact on their returns an order of magnitude greater than other stocks. Abnormal illiquidity is only able to account for a small fraction of the observed abnormal returns.

Keywords: Anomalies; Event study; Extreme weather events; Hurricanes; Illiquidity; Rare disasters; Tail risk (search for similar items in EconPapers)
JEL-codes: G14 G17 Q54 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:46:y:2019:i:c:s1386418118300776

DOI: 10.1016/j.finmar.2018.10.003

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