The memory of Katrina and the stock market response to hurricane-related news and events
Theodoros Chatzivasileiadis (),
Marjan Hofkes () and
Richard Tol ()
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F. Estrada: Centro de Ciencias de la Atmosfera, Universidad Nacional Autonoma de Mexico, Ciudad Universitaria, Mexico
Authors registered in the RePEc Author Service: Fernando Estrada () and
Francisco Estrada ()
Working Paper Series from Department of Economics, University of Sussex Business School
This paper examines the relationship between hurricane news coverage and U.S stock market returns focusing on the costliest hurricanes following Katrina (Ike, Irene and Sandy) and Patricia, which was one of the strongest hurricanes on record worldwide. In particular, we investigate the reaction of the market to hurricane news coverage and the way the memory of Katrina affected the investors’ decisions during hurricanes Ike, Irene, Sandy and Patricia. Using an event study methodology, we find that the event of a hurricane generates a significant positive reaction on the stock returns, in the short-term, that fades away over a 20 day period. The empirical evidence shown here suggests that hurricane related news coverage has a negative effect on stock returns for all events excluding hurricane Irene. Moreover, Katrina related news still have a significant effect during each event even 10 years after it took place. The memory of Katrina has a positive correction effect over the initial negative reaction of investors to the hurricane related news-coverage.
Keywords: Event study; Hurricanes; Stock market; News coverage (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:1417
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