Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Abnormal Returns and Impact of Information of Natural Disaster on the Indian Stock Market


Affiliations
1 Assistant Professor, IILM University, Gurugram, Haryana, India
2 Associate Professor, IILM University, Gurugram, Haryana, India
3 Research Scholar, Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India
     

   Subscribe/Renew Journal


The capital market responds to precedent and unprecedented events. These events play an important role in market efficiency. The purpose of this paper is to elaborate the state of the stock market due to the recurring landslides in the Uttarakhand region in India. This study will help to determine the loss faced by the companies in the Indian stock market. Hence, analysing the “shock due to the natural disaster” in the stock market is an important issue. The study is based on secondary sources of information about various landslides in India. To calculate the “shock due to the natural disaster” in the stock market, we have employed event study methodology to measure this impact. The paper finds that a negative shock is brought by this catastrophic disaster on the Indian stock market. The impact of this shock is on each and every industry in the market; however, the most significant impact is felt by the top companies in the various industries. The market has shown a negative trend in its abnormal returns on and after the event day. Conversely, as the news of relief programmes were released by the government after three or four days, the market again started becoming normal.

Keywords

Natural Disaster, Indian Stock Market, Event Study, Cumulative Abnormal Return
Subscription Login to verify subscription
User
Notifications
Font Size


  • Aiuppa, T. A., Carney, R. J., & Krueger, T. M. (1993). An examination of insurance stock prices following the 1989 Loma Prieta earthquake. Journal of Insurance Issues, 1-14.

  • Barton, D. R. Jr. (2005). How is the stock market affected by natural disasters? Retrieved from http://www.investmentu.com/content/detail/how-the-stock-market-is-affect-by-natural-distasters

  • Cutler, D. M., Poterba, J. M., & Summers, L. H. (1989). What moves stock prices? The Journal of Portfolio Management, 15(3), 4-12.

  • Fama, E. F. (1965). The behavior of stock-market prices. The Journal of Business, 38(1), 34-105.

  • Fama, E. F., Fisher, L., Jensen, M. C., & Roll, R. (1969). The adjustment of stock prices to new information. International Economic Review, 10(1), 1-21.

  • Liargovas, P., & Repousis, S. (2010). The impact of terrorism on Greek banks’ stocks: An event study. International Research Journal of Finance and Economics, 51, 1450-2887.

  • Luo, N. (2012). The impact of natural disasters on global stock market: The case of the Japanese 2011 earthquake.

  • Maierhofer, S. (2011). 5 Worst Disasters- How Did the Stock Market React? Retrieved from http://www.etfguide.com/research/526/8/5-Worst-Disasters-How-Didthe-Stock-Market-React?/

  • Malkiel, B. G., & Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383-417.

  • Mohammad H. Mojtahedi, S., & Lan Oo, B. (2014). Stakeholders’ approaches to disaster risk reduction in built environment. Disaster Prevention and Management, 23(4), 356-369.

  • Pande, R. K. (2006). Landslide problems in Uttaranchal, India: Issues and challenges. Disaster Prevention and Management: An International Journal, 15(2), 247-255.

  • Pande, R. K. (2006). Participation in practice and disaster management: Experience of Uttaranchal (India). Disaster Prevention and Management: An International Journal, 15(3), 425-428.

  • Report. (2013). Natural Disaster Report. Retrieved from http://www.disaster-report.com/2013/06/kedarnath- floods-2013-updates-pictures.html

  • Samaratunga, D. (2009). Stock market efficiency and integration: A study of eight economies in the Asia-Pacific region. Staff Studies, 38(1).

  • Schweitzer, R. (1989). How do stock returns react to special events. Business Review, (Jul), 17-29.

  • Uniyal, A. (2008). Prognosis and mitigation strategy for major landslide-prone areas: A case study of Varunavat Parvat landslide in Uttarkashi township of Uttarakhand (India). Disaster Prevention and Management: An International Journal, 17(5), 622-644.

  • Wang, L. (2011). The impact of Japanese natural disasters on stock market. Retrieved from http://artsci.wustl.edu/~gradconf/LinWang.pdf

  • Worthington, A., & Valadkhani, A. (2004). Measuring the impact of natural disasters on capital markets: An empirical application using intervention analysis. Applied Economics, 36(19), 2177-2186.


Abstract Views: 180

PDF Views: 0




  • Abnormal Returns and Impact of Information of Natural Disaster on the Indian Stock Market

Abstract Views: 180  |  PDF Views: 0

Authors

Shraddha Mishra
Assistant Professor, IILM University, Gurugram, Haryana, India
Vidhisha Vyas
Associate Professor, IILM University, Gurugram, Haryana, India
Vipin Kumar Meena
Research Scholar, Department of Commerce, Delhi School of Economics, University of Delhi, Delhi, India

Abstract


The capital market responds to precedent and unprecedented events. These events play an important role in market efficiency. The purpose of this paper is to elaborate the state of the stock market due to the recurring landslides in the Uttarakhand region in India. This study will help to determine the loss faced by the companies in the Indian stock market. Hence, analysing the “shock due to the natural disaster” in the stock market is an important issue. The study is based on secondary sources of information about various landslides in India. To calculate the “shock due to the natural disaster” in the stock market, we have employed event study methodology to measure this impact. The paper finds that a negative shock is brought by this catastrophic disaster on the Indian stock market. The impact of this shock is on each and every industry in the market; however, the most significant impact is felt by the top companies in the various industries. The market has shown a negative trend in its abnormal returns on and after the event day. Conversely, as the news of relief programmes were released by the government after three or four days, the market again started becoming normal.

Keywords


Natural Disaster, Indian Stock Market, Event Study, Cumulative Abnormal Return

References