Raining Money: An Empirical Analysis of the Impact of Severe Weather in The United States on Select Stock Market Performance

There are many conditions that can affect a public company’s stock price. One condition that isn’t completely direct is climate and natural disasters. Previous literature on this topic suggests that extreme-weather events mostly negatively impact company share prices, valuations, and crash risk, with hurricanes and earthquakes being focal points of research and S&P 500 effects being minimal. This project applies to an event study with a 60-day time frame (30 days before and 30 days after) by researching the prices of 100 public stocks across four types of disasters. The results of this study revealed that hurricanes have the most positive effect, wildfires have the most negative effect, and earthquakes have the most ambiguous impact, but these correlations cannot be completely confirmed. Further results also revealed that stock price dips are mainly temporary, and insurance companies were the most diversely impacted industry. Reasons for these results are likely the result of how a company was affected, whether it was disruptions in the supply chain, an increase in product demand, how much warning was given for the disaster, or other outside factors unrelated to any type of disaster. The results of this project mostly aligned with those in the previous literature, and when they did not, it was likely due to differences in project design and collected data. Overall, this study revealed that climate and natural disasters can have a positive or negative impact on the stock market, but these effects may be the result of random chance and outside factors.