Abstract
This article examines the market reaction of the main Property and Casualty (P & C) insurance companies listed in the New York Stock Exchange (NYSE) to seven most recent hurricanes that hit the East Coast of the United States from 2005 to 2012. For this purpose, we run a standard short horizon event study in order to test the existence of abnormal returns around the landfalls. P & C companies are one of the most affected sectors by such events because of the huge losses to rebuild, help and compensate the inhabitants of the affected areas. From the financial investors’ perception, this kind of events implies severe losses, which could influence the expected returns. Our research highlights the existence of significant cumulative abnormal returns around the landfall event window in most of the hurricanes analyzed, except for the Katrina and Sandy Hurricanes.
Highlights
In the context of climate change, natural disasters have emerged as a relevant topic in the recent academic literature, being addressed from a multidisciplinary point of view
It must be proved if the expected cumulative average abnormal returns (CAAR) of each hurricane are equal or different from 0 for the event window E (−10, +10)
49 event studies were conducted on seven major hurricanes from 2005 to 2012; all of
Summary
In the context of climate change, natural disasters have emerged as a relevant topic in the recent academic literature, being addressed from a multidisciplinary point of view. One of the most harmful disasters is the hurricane. According to the National Aeronautics and Space Administration (NASA) (2012), hurricanes are defined as large, rotating thunderstorms, which form over tropical and subtropical bodies of water. They usually take place in the tropical latitudes and most of them appear at the end of the summer, as it is the time when the temperature of the seawater is higher than during the rest of the year. Once a storm reaches the first category, this turns into a hurricane. The minimum gust of wind required considering a storm as a hurricane of category one is
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