Skip to main page content
U.S. flag

An official website of the United States government

Dot gov

The .gov means it’s official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

Https

The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Access keys NCBI Homepage MyNCBI Homepage Main Content Main Navigation
. 2022 Dec;29(56):84962-84988.
doi: 10.1007/s11356-022-21718-5. Epub 2022 Jul 5.

Market implied volatility and natural disasters: international evidence

Ping Wei  1 , Xiaodan Mao  1 , Xiaohong Chen  1 , Xiaohang Ren  2 , Yan Cheng  3
Affiliations

Market implied volatility and natural disasters: international evidence

Ping Wei et al. Environ Sci Pollut Res Int. 2022 Dec.

Abstract

Using daily data, we provide fresh international evidence that an occurrence of natural disaster is accompanied by an increase in the market implied volatility of the main equity index in the same country contemporaneously and in the future. The relation between market implied volatility and natural disaster is a short-run relationship, mainly driven by the subsample of countries with a low frequency of disaster or with developed financial markets. Our analysis shows that in contrast to ex post volatility measures, implied volatility can reflect more climate physical risk information, which provides insight for multinational equity investment in coping with environmental physical risk. Our findings provide insight for multinational equity investment in coping with climate physical risk.

Keywords: Disaster risk; Market implied volatility; Natural disasters.

PubMed Disclaimer

References

    1. Aslam M, Farvaque E, Malan F (2021) A disaster always rings twice: early life experiences and central bankers' reactions to natural disasters. Kyklos 74:301–320
    1. Bali GT, Peng L, Shen Y et al (2014) Liquidity shocks and stock market reactions. Rev Financ Stud 27(5):1434–1485
    1. Barro RJ (2006) 2006. Rare disasters and asset markets in the twentieth century. Q J Econ 121(3):823–866
    1. Barro RJ (2009) Rare disasters, asset prices, and welfare costs. Am Econ Rev 99(1):243–264
    1. Barro RJ, Ursua JF (2008) Consumption disasters in the 20th century. Am Econ Rev 98(2):58–63

MeSH terms

LinkOut - more resources