Abstract
We document strong abnormal effects due to U.S. landfall hurricanes over the period 1990 to 2017 on stock returns and illiquidity across portfolios of stocks sorted by market equity (ME), book-to-market equity ratio (BE/ME), momentum, return-on-equity (ROE), and investment-to-assets (I/A). ROE- and I/A-related long/short factors are insensitive to hurricanes, while size-, BE/ME-, and momentum-related factors are extremely sensitive to these extreme weather events. Long and short legs react differently and high momentum stocks experience a negative impact on their returns an order of magnitude greater than other stocks. Abnormal illiquidity is only able to account for a small fraction of the observed abnormal returns.
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