Effects of climatic events on the Chinese stock market: applying event analysis

Abstract

Unexpected events occur and influence both enterprises and investors. Based on event analysis, this study investigates the effects of unexpected climatic events that have occurred in the country and abroad on the Chinese stock market. The sample includes 21 indices according to industry from the Shenzhen Stock Exchange in China. The effects of climatic events that occurred in China and the USA on the Chinese stock market are compared. Results show that meteorological disasters (i.e., the snow storm in 2008 and strong tropical storm in 2011 in China, as well as the hurricane in 2005 and the snow storm in 2006 in the USA) have significant effects on the Chinese stock market. Moreover, the influences of these disasters on the Chinese stock market are different. The unexpected domestic climatic events have a greater effect on the volatility of the Chinese stock market than those that occurred in the USA. The same climatic event can have different effects on various industries, whereas different climatic events can have different effects on the same industry in China. Moreover, the manner in which these events influence industries may change in the future. We find that the magnitude of the effect on each industry depends on the sensitivity of the industries to the unexpected climatic events. Finally, several reasonable recommendations are proposed.