Market response of US equities to domestic natural disasters: industry-based evidence

This study investigates US industry-based price response to domestic natural disasters over the period 1960-2015. Using an event study methodology, we estimate pre, during and post disaster impacts and document a slower response in pre-disaster period than in post-disaster period. We further find that industries react differently to the same disaster and that reactions are not always negative. For example, meteorological disasters have a positive (negative) market impact on Gold (Banking). Moreover, we provide evidence that not every industry responds similarly to different disasters e.g. Gold reacts positively (negatively) to meteorological (geophysical) disasters. As such, we identify key “winner” and “loser” industries in the event of respective natural disasters, which is suggestive of safer investment opportunities to investors sensitive to the prospect of future similar scenarios.