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Measuring the impact of natural disasters on capital markets: An empirical application using intervention analysis. Discussion Paper No. 154

Worthington, Andrew C. & Valadkhani, Abbas (2003) Measuring the impact of natural disasters on capital markets: An empirical application using intervention analysis. Discussion Paper No. 154. [Working Paper] (Unpublished)

Abstract

This paper examines the impact of natural disasters on the Australian equity market. The data set employed consists of daily price and accumulation returns over the period 31 December 1982 to 1 January 2002 for the All Ordinaries Index (AOI) and a record of forty-two severe storms, floods, cyclones, earthquakes and bushfires (wildfires) during this period with an insured loss in excess of AUD5 mil. and/or total loss in excess of AUD100 mil. Autoregressive moving average (ARMA) models are used to model the returns and the inclusion of news arrival in the form of the natural disasters is specified using intervention analysis. The results indicate bushfires, cyclones and earthquakes have a major effect on market returns, unlike severe storms and floods. The net effects can be positive and/or negative with most effects being felt on the day of the event and with some adjustment in the days that follow.

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ID Code: 330
Item Type: Working Paper
Keywords: natural events, natural disasters, catastrophes, market returns, intervention analysis, ARMA, equity market
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2003 (please consult author)
Deposited On: 10 Aug 2004
Last Modified: 05 Jan 2011 23:23

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