The effects of natural disasters on stock market return and volatility in Hong Kong

Nguyen, Thi Minh Trang, and Chaiechi, Taha (2020) The effects of natural disasters on stock market return and volatility in Hong Kong. In: Chaiechi, Taha, (ed.) Economic Effects of Natural Disasters: theoretical foundations, methods, and tools. Elsevier, London, UK, pp. 11-18.

[img] PDF (Published Version) - Published Version
Restricted to Repository staff only

View at Publisher Website: https://doi.org/10.1016/B978-0-12-817465...
 
1


Abstract

Hong Kong is located at the Pearl River Delta, which is among the urban areas that are most vulnerable to natural disasters in the world. The research suggests that environmental factors such as climate factors can have significant effects on the performance of stock markets. The aim of this chapter is thus to explore the effects of natural disasters on the stock market return and volatility in Hong Kong, over various event windows from 1 day to 2 months postdisaster. An ARMAX (autoregressive moving average with exogenous regressor)–EGARCHX (exponential generalised autoregressive conditional heteroskedasticity with exogenous regressor) model, which is an augmentation of a standard ARMA process with an EGARCH (exponential generalized autoregressive conditional heteroskedastic) process and an intervention variable X, was used for empirical analysis. The results reveal that natural disasters have adverse effects on the Hong Kong Stock Market return and volatility with increasing magnitude. However, the adverse effects only survive for a short period of up to 12 days after the events before dying out afterward. In addition, the presence of asymmetric volatility indicates that market return volatility is higher during extreme weather events. Higher return volatility induces a higher probability of a bear market.

Item ID: 64619
Item Type: Book Chapter (Research - B1)
ISBN: 978-0-12-817465-4
Copyright Information: Copyright © 2021 Elsevier Inc. All rights reserved.
Date Deposited: 19 Oct 2020 00:46
FoR Codes: 38 ECONOMICS > 3801 Applied economics > 380103 Economic history @ 50%
38 ECONOMICS > 3802 Econometrics > 380205 Time-series analysis @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910103 Economic Growth @ 50%
91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910199 Macroeconomics not elsewhere classified @ 50%
Downloads: Total: 1
More Statistics

Actions (Repository Staff Only)

Item Control Page Item Control Page