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Do Earthquakes Shake Stock Markets?

Author

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  • Susana Ferreira
  • Berna Karali
Abstract
This paper examines how major earthquakes affected the returns and volatility of aggregate stock market indices in thirty-five financial markets over the last twenty years. Results show that global financial markets are resilient to shocks caused by earthquakes even if these are domestic. Our analysis reveals that, in a few instances, some macroeconomic variables and earthquake characteristics (gross domestic product per capita, trade openness, bilateral trade flows, earthquake magnitude, a tsunami indicator, distance to the epicenter, and number of fatalities) mediate the impact of earthquakes on stock market returns, resulting in a zero net effect. However, the influence of these variables is market-specific, indicating no systematic pattern across global capital markets. Results also demonstrate that stock market volatility is unaffected by earthquakes, except for Japan.

Suggested Citation

  • Susana Ferreira & Berna Karali, 2015. "Do Earthquakes Shake Stock Markets?," PLOS ONE, Public Library of Science, vol. 10(7), pages 1-19, July.
    • Handle: RePEc:plo:pone00:0133319
    DOI: 10.1371/journal.pone.0133319
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    Cited by:

    1. Kei Nakagawa & Kohei Hayashi & Yugo Fujimoto, 2024. "CFTM: Continuous time fractional topic model," Papers 2402.01734, arXiv.org, revised Feb 2024.
    2. Di Tommaso, Caterina & Foglia, Matteo & Pacelli, Vincenzo, 2023. "The impact and the contagion effect of natural disasters on sovereign credit risk. An empirical investigation," International Review of Financial Analysis, Elsevier, vol. 87(C).
    3. Valizadeh, Pourya & Karali, Berna & Ferreira, Susana, 2017. "Ripple effects of the 2011 Japan earthquake on international stock markets," Research in International Business and Finance, Elsevier, vol. 41(C), pages 556-576.
    4. Di Tommaso, Caterina & Mazzuca, Maria, 2023. "The stock price of European insurance companies: What is the role of ESG factors?," Finance Research Letters, Elsevier, vol. 56(C).
    5. Md. Noman Siddikee & Mohammad Mafizur Rahman, 2017. "Effect of catastrophic disaster in financial market contagion," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1288772-128, January.
    6. Arias-Calluari, Karina & Najafi, Morteza. N. & Harré, Michael S. & Tang, Yaoyue & Alonso-Marroquin, Fernando, 2022. "Testing stationarity of the detrended price return in stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 587(C).
    7. Kuzu, Erkan & Süsay, Aynur & Tanrıöven, Cihan, 2022. "A model study for calculation of the temperatures of major stock markets in the world with the quantum simulation and determination of the crisis periods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 585(C).
    8. Zhang, Jing Hua & Tam, Kwo Ping & Zhou, Nan, 2016. "Do smoking bans always hurt the gaming industry? Differentiated impacts on the market value of casino firms in Macao (China)," Economics Discussion Papers 2016-21, Kiel Institute for the World Economy (IfW Kiel).
    9. Khalid Khan & Javier Cifuentes-Faura & Muhammad Shahbaz, 2024. "Do earthquakes shake the stock market? Causal inferences from Turkey’s earthquake," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-19, December.
    10. G.K., Chetan Kumar & K.B., Rangappa & S., Suchitra, 2022. "Normative analysis of the impact of Covid-19 on prominent sectors of Indian economy by using ARCH Model," MPRA Paper 114027, University Library of Munich, Germany.
    11. William N. Goetzmann & Dasol Kim & Robert J. Shiller, 2016. "Crash Beliefs From Investor Surveys," NBER Working Papers 22143, National Bureau of Economic Research, Inc.
    12. Kling, Gerhard & Volz, Ulrich & Murinde, Victor & Ayas, Sibel, 2021. "The impact of climate vulnerability on firms’ cost of capital and access to finance," World Development, Elsevier, vol. 137(C).
    13. Sunkung Choi, 2023. "Measuring economic diplomacy using event study method: the case of EU-China summit talks and Airbus stock price changes," Asia Europe Journal, Springer, vol. 21(2), pages 155-171, June.
    14. C. Justin Robinson & Prosper Bangwayo-Skeete, 2017. "Semi-strong Form Market Efficiency in Stock Markets with Low Levels of Trading Activity: Evidence from Stock Price Reaction to Major National and International Events," Global Business Review, International Management Institute, vol. 18(6), pages 1447-1464, December.
    15. Matthijs Jan Kallen & Bert Scholtens, 2021. "Movers and Shakers: Stock Market Response to Induced Seismicity in Oil and Gas Business," Energies, MDPI, vol. 14(23), pages 1-12, December.
    16. Pagnottoni, Paolo & Spelta, Alessandro & Flori, Andrea & Pammolli, Fabio, 2022. "Climate change and financial stability: Natural disaster impacts on global stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 599(C).

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